We study the randomized approximation of weakly singular integral operators. For a suitable class of kernels having a standard type of singularity and being otherwise of finite smoothness, we develop a Monte Carlo multilevel method, give convergence estimates and prove lower bounds which show the optimality of this method and establish the complexity. As an application we obtain optimal methods...

Real option analysis (ROA) is a way of valuing real assets by invoking option pricing theory. In contrast to the traditional net present value approach, ROA makes it possible to explicitly incorporating management flexibility. Because of such advantages, ROA has become an important tool for project valuation and is widely used in practice. In this paper, we develop a real option model with regi...

It is widely held that insurance discourages people from taking diagnostic tests since such tests can turn up information that leads to uninsurability. We develop a model in which some consumers are initially informed of their risk type and others are uninformed, and there is a treatment option. People decide whether to be tested, uninformed insurers offer contracts, and consumers select their ...

This paper deals with a new methodology to evaluate the real operating options embedded in a manufacturing system investment. In a single product framework, the demand is assumed as the main source of uncertainty, therefore as a stochastic variable following a Geometric Brownian Motion (GBM). Then, focusing on the real option to expand the capacity at a certain time in the future, we have devel...

We examine the value of an exploration prospect that is to be exploited via a series of possibly dependent trials. Failure on any particular trial is assumed to convey bad news, but also provides an option to try again. The pattern and strength of dependence among trials determines the value of this option, and therefore also influences the value of the underlying prospect. We describe the solu...

The idea of real option is applied in military software pricing in this paper. By analysis of Black-Scholes pricing model, we figure two crucial variables. One is value of software option that is regarded as estimated cost in our study. We give the logical analysis based on the option feature of estimated cost and also the practical test by building up a system of equations. The other one is th...

Option trading forms part of our financial markets. A traded option gives to its owner the right to buy (call option) or to sell (put option) a fixed quantity of assets of a specified stock at a fixed price (exercise or strike price). There are two major types of traded options. One is the American option that can be exercised at any time prior to its expiry date, and the other option, which ca...

In the context of a Black-Scholes economy and with a no-arbitrage argument, we derive arbitrarily accurate lower and upper bounds for the value of European options on a stock paying a discrete dividend. Setting the option price error below the smallest monetary unity, both bounds coincide, and we obtain the exact value of the option.

F with fragmented markets, saturated and demanding customers, and global competition, firms increasingly must design and offer a line of innovative, quality-differentiated products to target customers with differing willingness to pay (WTP). In this context, designing a special class of products that we term developmentintensive products (DIPs)—for which the fixed costs of development far outwe...