626 research outputs found
Applied Intertemporal Optimization
This textbook provides all tools required to easily solve intertemporal optimization problems in economics, finance, business administration and related disciplines. The focus of this textbook is on 'learning through examples' and gives a very quick access to all methods required by an undergraduate student, a PhD student and an experienced researcher who wants to explore new fields or confirm existing knowledge. Given that discrete and continuous time problems are given equal attention, insights gained in one area can be used for learning solutions methods more quickly in other contexts. This step-by-step approach is especially useful for the transition from deterministic to stochastic worlds. When it comes to stochastic methods in continuous time, the applied focus of this book is the most useful. Formulating and solving problems under continuous time uncertainty has never been explained in such a non-technical and highly accessible way.Intertemporal optimization, maximization, discrete time, continuous time, certainty, uncertainty, inserting, Lagrange, Hamiltonian, Dynamic Programming, Bellman equation, Ito's Lemma, Brownian motion, Poisson process, natural volatility
Deterministic networks for probabilistic computing
Neural-network models of high-level brain functions such as memory recall and
reasoning often rely on the presence of stochasticity. The majority of these
models assumes that each neuron in the functional network is equipped with its
own private source of randomness, often in the form of uncorrelated external
noise. However, both in vivo and in silico, the number of noise sources is
limited due to space and bandwidth constraints. Hence, neurons in large
networks usually need to share noise sources. Here, we show that the resulting
shared-noise correlations can significantly impair the performance of
stochastic network models. We demonstrate that this problem can be overcome by
using deterministic recurrent neural networks as sources of uncorrelated noise,
exploiting the decorrelating effect of inhibitory feedback. Consequently, even
a single recurrent network of a few hundred neurons can serve as a natural
noise source for large ensembles of functional networks, each comprising
thousands of units. We successfully apply the proposed framework to a diverse
set of binary-unit networks with different dimensionalities and entropies, as
well as to a network reproducing handwritten digits with distinct predefined
frequencies. Finally, we show that the same design transfers to functional
networks of spiking neurons.Comment: 22 pages, 11 figure
Applications of Stochastic Control in Energy Real Options and Market Illiquidity
We present three interesting applications of stochastic control in finance. The first is a real option model that considers the optimal entry into and subsequent operation of a biofuel production facility. We derive the associated Hamilton Jacobi Bellman (HJB) equation for the entry and operating decisions along with the econometric analysis of the stochastic price inputs. We follow with a Monte Carlo analysis of the risk profile for the facility. The second application expands on the analysis of the biofuel facility to account for the associated regulatory and taxation uncertainty experienced by players in the renewables and energy industries. A federal biofuel production subsidy per gallon has been available to producers for many years but the subsidy price level has changed repeatedly. We model this uncertain price as a jump process. We present and solve the HJB equations for the associated multidimensional jump diffusion problem which also addresses the model uncertainty pervasive in real option problems such as these. The novel real option framework we present has many applications for industry practitioners and policy makers dealing with country risk or regulatory uncertainty---which is a very real problem in our current global environment. Our final application (which, although apparently different from the first two applications, uses the same tools) addresses the problem of producing reliable bid-ask spreads for derivatives in illiquid markets. We focus on the hedging of over the counter (OTC) equity derivatives where the underlying assets realistically have transaction costs and possible illiquidity which standard finance models such as Black-Scholes neglect. We present a model for hedging under market impact (such as bid-ask spreads, order book depth, liquidity) using temporary and permanent equity price impact functions and derive the associated HJB equations for the problem. This model transitions from continuous to impulse trading (control) with the introduction of fixed trading costs. We then price and hedge via the economically sound framework of utility indifference pricing. The problem of hedging under liquidity impact is an on-going concern of market makers following the Global Financial Crisis
Quantitative Models in Life Science Business
This open access book explores the field of life science business from a multidisciplinary perspective. Applying statistical, mathematical, game-theoretic, and data science tools to pharmaceutical and biotechnology business endeavors, the book describes value creation, value maintenance, and value realization in the life sciences as a sequence of processes using the quantitative language of applied mathematics. Written by experts from a variety of fields, the contributions illustrate the shift from a deterministic to a stochastic view of the processes involved, offering a new perspective on life sciences economics. The book covers topics such as valuing and managing intellectual property in life science, licensing in the pharmaceutical business, outsourcing pharmaceutical R&D, and stochastic modelling of a pharmaceutical supply chain. The book will appeal to scholars of economics and the life sciences, as well as to professionals in chemical and pharmaceutical industries
Quantitative Models in Life Science Business
This open access book explores the field of life science business from a multidisciplinary perspective. Applying statistical, mathematical, game-theoretic, and data science tools to pharmaceutical and biotechnology business endeavors, the book describes value creation, value maintenance, and value realization in the life sciences as a sequence of processes using the quantitative language of applied mathematics. Written by experts from a variety of fields, the contributions illustrate the shift from a deterministic to a stochastic view of the processes involved, offering a new perspective on life sciences economics. The book covers topics such as valuing and managing intellectual property in life science, licensing in the pharmaceutical business, outsourcing pharmaceutical R&D, and stochastic modelling of a pharmaceutical supply chain. The book will appeal to scholars of economics and the life sciences, as well as to professionals in chemical and pharmaceutical industries
Current Topics on Risk Analysis: ICRA6 and RISK2015 Conference
Peer ReviewedPostprint (published version
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