Optimal Stopping in Levy Models, for Non-Monotone Discontinuous Payoffs

We give short proofs of general theorems about optimal entry and exit problems in Levy models, when payoff streams may have discontinuities and be non-monotone. As applications, we consider exit and entry problems in the theory of real options, and an entry problem with an embedded option to exit

DEVELOPMENT OF A STRATEGIC BUSINESS DECISION-MAKING ENVIRONMENT FOR COMMERCIAL JET ENGINE SELECTION

Presented at the 41st AIAA Aerospace Sciences, Meeting and Exhibit, Reno, NV, January 6-10, 2003.In today?s business climate, aerospace companies are more than ever in need of rational methods and techniques that provide insights as to the best strategies which may be pursued for increased profitability and risk mitigation. However, the use of subjective, anecdotal decision-making remains prevalent due to the absence of analytical methods capable of capturing and forecasting future needs. Negotiations between airframe and engine manufacturers could benefit greatly from a structured environment that facilitates efficient, rational, decision-making. Creation of such an environment can be developed through a parametric physics-based, stochastic formulation that uses meta-models to expedite the process. This paper describes such an approach in order to demonstrate the types of insights that might be gained as an engine manufacturer tries to forecast the effects of uncertainties and future vehicle requirements on engine related characteristics for the design of a hypothetical regional business jet. Game theory concepts are suggested as a potential means by which one can attach business payoffs to the selection of any engine design point

Rivalry and uncertainty in complementary investments with dynamic market sharing

We study the effects of revenue and investment cost uncertainty, as well non- preemption duopoly competition, on the timing of investments in two complementary inputs, where either spillover-knowledge is allowed or proprietary-knowledge holds. We find that the ex-ante and ex-post revenue market shares play a very important role in firms’ behavior. When competition is considered, the leader’s behavior departs from that of the monopolist firm of Smith (Ind Corp Change 14:639–650, 2005). The leader is justified in following the conventional wisdom (i.e., synchronous investments are more likely), whereas, the follower’s behavior departs from that of the conventional wisdom (i.e., asynchronous investments are more likely)