Stochastic Models and Option Values

by Lund, Diderik; Oksendal, Bernt

• ISBN13: 9780444886309
• ISBN10: 0444886303
• Format: Hardcover
• Copyright: 1991-06-01
• Publisher: Emerald Group Pub Ltd

Summary

This book is a result of recent developments in several fields. Mathematicians, statisticians, finance theorists, and economists found several interconnections in their research. The emphasis was on common methods, although the applications were also interrelated. The main topic is dynamic stochastic models, in which information arrives and decisions are made sequentially. This gives rise to what finance theorists call option value, what some economists label quasi-option value. Some papers extend the mathematical theory, some deal with new methods of economic analysis, while some present important applications, to natural resources in particular.

Table of Contents

Introduction

Stochastic Models and Option Values: An Introduction

Stochastic Control Theory - A Brief Summary

Financial Option Theory Applied to Real Investment

The Price of Convenience and the Valuation of Commodity Contingent Claims

Valuation of Long Term Oil-Linked Assets

The Cost of a Promise to Develop an Oil Field within a Fixed Future Date

Irreversibility and the Explanation of Investment Behavior

Financial and Non-financial Option Valuation

Stochastic Control and Dynamic Programming

Partial Investment

The High Contact Principle as a Sufficiency Condition for Optimal Stopping

Invariant Controls in Stochastic Allocation Problems

Shadow Prices in Stochastic Programming: Their Existence and Significance

Statistical Models of Natural Resource Exploitation

Estimating Structural Resource Models when Stock is Uncertain: Theory and its Application to Pacific Halibut

Optimal Decision with Reduction of Uncertainty over Time - An Application to Oil Production

Author index

Subject index

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