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Author: Robert K. Dixit
Publisher: Princeton University Press
ISBN: 1400830176
Category : Business & Economics
Languages : en
Pages : 484
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Book Description
How should firms decide whether and when to invest in new capital equipment, additions to their workforce, or the development of new products? Why have traditional economic models of investment failed to explain the behavior of investment spending in the United States and other countries? In this book, Avinash Dixit and Robert Pindyck provide the first detailed exposition of a new theoretical approach to the capital investment decisions of firms, stressing the irreversibility of most investment decisions, and the ongoing uncertainty of the economic environment in which these decisions are made. In so doing, they answer important questions about investment decisions and the behavior of investment spending. This new approach to investment recognizes the option value of waiting for better (but never complete) information. It exploits an analogy with the theory of options in financial markets, which permits a much richer dynamic framework than was possible with the traditional theory of investment. The authors present the new theory in a clear and systematic way, and consolidate, synthesize, and extend the various strands of research that have come out of the theory. Their book shows the importance of the theory for understanding investment behavior of firms; develops the implications of this theory for industry dynamics and for government policy concerning investment; and shows how the theory can be applied to specific industries and to a wide variety of business problems.
Author: Robert K. Dixit
Publisher: Princeton University Press
ISBN: 1400830176
Category : Business & Economics
Languages : en
Pages : 484
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Book Description
How should firms decide whether and when to invest in new capital equipment, additions to their workforce, or the development of new products? Why have traditional economic models of investment failed to explain the behavior of investment spending in the United States and other countries? In this book, Avinash Dixit and Robert Pindyck provide the first detailed exposition of a new theoretical approach to the capital investment decisions of firms, stressing the irreversibility of most investment decisions, and the ongoing uncertainty of the economic environment in which these decisions are made. In so doing, they answer important questions about investment decisions and the behavior of investment spending. This new approach to investment recognizes the option value of waiting for better (but never complete) information. It exploits an analogy with the theory of options in financial markets, which permits a much richer dynamic framework than was possible with the traditional theory of investment. The authors present the new theory in a clear and systematic way, and consolidate, synthesize, and extend the various strands of research that have come out of the theory. Their book shows the importance of the theory for understanding investment behavior of firms; develops the implications of this theory for industry dynamics and for government policy concerning investment; and shows how the theory can be applied to specific industries and to a wide variety of business problems.
Author: Michael Joe Lyda
Publisher:
ISBN:
Category : Dissertations, Academic
Languages : en
Pages : 172
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Book Description
Author: Jonas Ekblom
Publisher: Linköping University Electronic Press
ISBN: 9176852024
Category :
Languages : en
Pages : 36
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Book Description
This thesis addresses the topic of decision making under uncertainty, with particular focus on financial markets. The aim of this research is to support improved decisions in practice, and related to this, to advance our understanding of financial markets. Stochastic optimization provides the tools to determine optimal decisions in uncertain environments, and the optimality conditions of these models produce insights into how financial markets work. To be more concrete, a great deal of financial theory is based on optimality conditions derived from stochastic optimization models. Therefore, an important part of the development of financial theory is to study stochastic optimization models that step-by-step better capture the essence of reality. This is the motivation behind the focus of this thesis, which is to study methods that in relation to prevailing models that underlie financial theory allow additional real-world complexities to be properly modeled. The overall purpose of this thesis is to develop and evaluate stochastic optimization models that support improved decisions under uncertainty on financial markets. The research into stochastic optimization in financial literature has traditionally focused on problem formulations that allow closed-form or `exact' numerical solutions; typically through the application of dynamic programming or optimal control. The focus in this thesis is on two other optimization methods, namely stochastic programming and approximate dynamic programming, which open up opportunities to study new classes of financial problems. More specifically, these optimization methods allow additional and important aspects of many real-world problems to be captured. This thesis contributes with several insights that are relevant for both financial and stochastic optimization literature. First, we show that the modeling of several real-world aspects traditionally not considered in the literature are important components in a model which supports corporate hedging decisions. Specifically, we document the importance of modeling term premia, a rich asset universe and transaction costs. Secondly, we provide two methodological contributions to the stochastic programming literature by: (i) highlighting the challenges of realizing improved decisions through more stages in stochastic programming models; and (ii) developing an importance sampling method that can be used to produce high solution quality with few scenarios. Finally, we design an approximate dynamic programming model that gives close to optimal solutions to the classic, and thus far unsolved, portfolio choice problem with constant relative risk aversion preferences and transaction costs, given many risky assets and a large number of time periods.
Author: Hossein B. Kazemi
Publisher:
ISBN:
Category : Equilibrium (Economics)
Languages : en
Pages : 470
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Book Description
substitution and rational expectations. A consumption based CAPM is derived which demonstrates that in a monetary economy the riskiness of a security depends on its covariances with changes in supplies of currencies and aggregate production of consumption goods.
Author: Federica Gioia
Publisher:
ISBN:
Category : Business & Economics
Languages : en
Pages : 0
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Book Description
Author: Robert A. Schwartz
Publisher: Springer
ISBN: 9781461427612
Category : Business & Economics
Languages : en
Pages : 0
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Book Description
Volatility is very much with us in today's equity markets. Day-to-day price swings are often large and intra-day volatility elevated, especially at market openings and closings. What explains this? What does this say about the quality of our markets? Can short-period volatility be controlled by better market design and a more effective use of electronic technology? Featuring insights from an international array of prominent academics, financial markets experts, policymakers and journalists, the book addresses these and other questions concerning this timely topic. In so doing, we seek deeper knowledge of the dynamic process of price formation, and of the market structure and regulatory environment within which our markets function. The Zicklin School of Business Financial Markets Series presents the insights emerging from a sequence of conferences hosted by the Zicklin School at Baruch College for industry professionals, regulators, and scholars. Much more than historical documents, the transcripts from the conferences are edited for clarity, perspective and context; material and comments from subsequent interviews with the panelists and speakers are integrated for a complete thematic presentation. Each book is focused on a well delineated topic, but all deliver broader insights into the quality and efficiency of the U.S. equity markets and the dynamic forces changing them.
Author: Elhanan Helpman
Publisher:
ISBN:
Category : Business & Economics
Languages : en
Pages : 216
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Book Description
Author: J.H.H Thijssen
Publisher: Springer Science & Business Media
ISBN: 1402079443
Category : Business & Economics
Languages : en
Pages : 255
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Book Description
Two crucial aspects of economic reality are uncertainty and dynamics. In this book, new models and techniques are developed to analyse economic dynamics in an uncertain environment. In the first part, investment decisions of firms are analysed in a framework where imperfect information regarding the investment's profitability is obtained randomly over time. In the second part, a new class of cooperative games, spillover games, is developed and applied to a particular investment problem under uncertainty: mergers. In the third part, the effect of bounded rationality on market evolution is analysed for oligopolistic competition and incomplete financial markets.
Author: Antonio J. Conejo
Publisher: Springer Science & Business Media
ISBN: 1441974210
Category : Business & Economics
Languages : en
Pages : 549
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Book Description
Decision Making Under Uncertainty in Electricity Markets provides models and procedures to be used by electricity market agents to make informed decisions under uncertainty. These procedures rely on well established stochastic programming models, which make them efficient and robust. Particularly, these techniques allow electricity producers to derive offering strategies for the pool and contracting decisions in the futures market. Retailers use these techniques to derive selling prices to clients and energy procurement strategies through the pool, the futures market and bilateral contracting. Using the proposed models, consumers can derive the best energy procurement strategies using the available trading floors. The market operator can use the techniques proposed in this book to clear simultaneously energy and reserve markets promoting efficiency and equity. The techniques described in this book are of interest for professionals working on energy markets, and for graduate students in power engineering, applied mathematics, applied economics, and operations research.
Author: Eric Barthalon
Publisher: Columbia University Press
ISBN: 0231538308
Category : Business & Economics
Languages : en
Pages : 445
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Book Description
Eric Barthalon applies the neglected theory of psychological time and memory decay of Nobel Prize–winning economist Maurice Allais (1911–2010) to model investors' psychology in the present context of recurrent financial crises. Shaped by the behavior of the demand for money during episodes of hyperinflation, Allais's theory suggests economic agents perceive the flow of clocks' time and forget the past at a context-dependent pace: rapidly in the presence of persistent and accelerating inflation and slowly in the event of the opposite situation. Barthalon recasts Allais's work as a general theory of "expectations" under uncertainty, narrowing the gap between economic theory and investors' behavior. Barthalon extends Allais's theory to the field of financial instability, demonstrating its relevance to nominal interest rates in a variety of empirical scenarios and the positive nonlinear feedback that exists between asset price inflation and the demand for risky assets. Reviewing the works of the leading protagonists in the expectations controversy, Barthalon exposes the limitations of adaptive and rational expectations models and, by means of the perceived risk of loss, calls attention to the speculative bubbles that lacked the positive displacement discussed in Kindleberger's model of financial crises. He ultimately extrapolates Allaisian theory into a pragmatic approach to investor behavior and the natural instability of financial markets. He concludes with the policy implications for governments and regulators. Balanced and coherent, this book will be invaluable to researchers working in macreconomics, financial economics, behavioral finance, decision theory, and the history of economic thought.
