I document a sizeable bias that might arise when valuing out of the money American options via the Least Square Method proposed by Longstaff and Schwartz (2001). The key point of this algorithm is the regression-based estimate of the continuation value of an American option. If this regression...

In this paper we propose a real options model for the valuation of a gas-fired power-generating turbine that can be switched off-and-on many times according to the time-varying profitability of energy production over the short- term. In this framework, we study the effect of including several...