There are several risk-sensitive industries like air traffic, nuclear power generation, dangerous chemical processes, etc. The technical solutions used are usually well approved and widely known; the occasional problems usually originate from the not-careful-enough design, the insufficient risk assessment, the unsatisfactory training and mismanagement. With proper operation and waste management...

We propose a tractable model of entrepreneur dynamics where the investment conditions are stochastic. Applying the approach of stochastic control and optimization, we solve the dynamics of the entrepreneur’s optimal investment, consumption and portfolio allocation under regime switching. We find that the interactions of precautionary savings and liquidation boundary advance/postpone motives gen...

Every organisation has an internal control system (ICS), some very complex others very basic. These are created on a risk basis. The paper proposes a methodology whereby management can monitor the effectiveness and cost effectiveness of their ICS. In addition it proposes a methodology of managing the ICS and for determining the required controls which is operable by the senior management. It al...

Services based outsourcing continues to be a growing trend for US companies. At such a juncture, there is a tendency for companies to pursue this strategy without careful evaluation of the costs and risks involved. The evaluation of the cost-benefit analysis is crucial before making a decision as to whether one should outsource or not. Transactional Cost Economics (TCE) is one model that has re...

This paper analyzes equilibrium rationing on credit markets in the case of gains from waiting to acquire information about the future profitability of investment. We compare the competitive outcome with the socially optimal level of investment. We show that the opportunity to postpone investment changes the nature of the inefficiencies of the competitive outcome fundamentally. Without the optio...

Farming imposes unenthusiastic externalities upon society. It effects by differ‐ ent sources such as loss of biodiversity, land erosion, nutrient overflow, more water usage and pesticides. Optimistic externalities include respect of nature, independence, free enterprise, and the quality of air. Natural methods decrease some of these costs. It has been proposed that organic farming can reduce th...

The main area which Formal Safety Assessment (FSA) methodology was created for is maritime safety. Its model presents quantitative risk estimation and takes detailed information about accident characteristics into account. Nowadays, it is broadly used in shipping navigation around the world. It has already been shown that FSA can be widely used for the assessment of pilotage safety. On the basi...

The risk-neutral equilibrium bidding strategy for first-price auctions with independent private values is justified without assuming a well-defined Bayesian game. Bidders, aware of their own value, assume the private values to be linearly related. The latter, however, are independent and identically distributed, and this is only known by Nature. Allowing for arbitrary linear common value belief...

In bargaining environments with uncertain impasse outcomes (e.g., litigation or labor strike outcomes), there is an identification problem that confounds data interpretation. In such environments, the minimally acceptable settlement value from a risk-averse (risk-loving) but unbiased bargainer is empirically indistinguishable from what one could get with risk-neutrality and pessimism (optimism)...

This chapter studies structural and reduced-form credit risk models under incomplete information using techniques from stochastic filtering. We start with a brief introduction to stochastic filtering. Next we cover the pricing of corporate securities (debt and equity) in structural models under partial information. Furthermore we study the construction of a dynamic reduced-form credit risk mode...