Real Options with Random Controls, Rare Events, and Risk-to-Ruin

  • Nicos Koussis
  • Spiros H. Martzoukos
  • Lenos Trigeorgis
Conference paper
Part of the Advances in Computational Management Science book series (AICM, volume 9)

Summary

Situations involving real investment options in the presence of multiple sources of jump risk, and controls are analyzed. Randomly arriving jumps include also the special cases of jump-to-ruin on the underlying asset, or on the contingent claim. Management has available impulse-type controls with random outcome. The analytic solutions when available, and a Markov-Chain numerical approach for solving more general investment decision problems are demonstrated

Key words

Flexibility real options multi-class jump-diffusion processes catastrophic risks controls with random outcome Markov-Chains 
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Copyright information

© Springer-Verlag Berlin Heidelberg 2007

Authors and Affiliations

  • Nicos Koussis
    • 1
  • Spiros H. Martzoukos
    • 1
  • Lenos Trigeorgis
    • 1
  1. 1.Department of Public and Business AdministrationUniversity of CyprusNicosiaCyprus

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