We clarify the relations among different Fourier-based approaches to option pricing, and improve the B-spline probability density projection method using the sinh-acceleration technique. This allows us to efficiently separate the control of different sources of errors better than the FFT-based...

The real options approach is used to explain discounted utility anomalies as artifacts of the optimizing behavior of an individual with standard preferences, who perceives the utility from consumption in the future as uncertain. For this individual,waiting is valuable because uncertainty is...

We explain essentially all known discounted utility anomalies as artefacts of the optimizing behavior of an individual with a time-separable utility function, who perceives a good as a source of a stochastic consumption stream, and believes that she can wait for an optimal moment to buy or sell...

We suggest a simple reduction of pricing European options in affine jump-diffusion models to pricing options with modified payoffs in diffusion models. The procedure is based on the conjugation of the infinitesimal generator of the model with an operator of the form $e^{i\Phi(-\sqrt{-1}\dd_x)}$...

This paper provides a general framework for pricing of real options in continuous time for wide classes of payoff streams that are functions of Levy processes. As applications, we calculate the option values of multi-stage investment/disinvestment problems (sequences of embedded options, which...

We calculate optimal exercise boundaries and rational prices for perpetual American call and put options, and solve entry and exit problems when the underlying uncertainty is modelled as an exponential Ornstein-Uhlenbeck process. The solution is almost as simple as in the case of an exponential...

This paper is an extended version of the paper quot;Practical Guideto Real Options in Discrete Timequot; (http://ssrn.com/abstract=510324), where a general, computationally simple approach to real options in discrete time was suggested. We explicitly formulate conditions of the general theorems...

We show that three classes of multi-factor gaussian mean-reverting models: for the dynamics of the (log-)price of a stock, ATSM of the Ornstein-Uhlenbeck type, and QTSM are equivalent, when contingent claims with deterministic life-spans are considered. We provide the reduction of these models...