To have a real option means to have the possibility for a certain period to either choose for or against making an invetsment decision, without binding oneself up front. The real option rule is that one should invest today only if the net present value is high enough to compensate for giving up the value of the option to wait. Because the option to invest loses its value when the investment is irreversibly made, this loss is an opportunity cost of investing. The main question that a management group must answer for a deferrable investment opportunity is: How long do we postpone the investment, if we can postpone it, up to T time periods? In this paper we shall introduce a Read the rest of this entry »
Possibilities for performing stochastic simulations on the analog and fully parallelized Cellular Neural Network Universal Machine (CNN-UM) are investigated. By using a chaotic cellular automaton perturbed with the natural noise of the CNN-UM chip, a realistic binary random number generator is built. As a specific example for Monte Carlo type simulations, we use this random number generator and a CNN template to study the classical site-percolation problem on the ACE16K chip. The study reveals that Read the rest of this entry »
We investigate optimal buy-and-hold strategies for terminal wealth problems in a multi-period framework. As terminal wealth is a sum of dependent random variables, the distribution function of final wealth cannot be determined analytically for any realistic model. By calculating lower bounds in the convex order sense, we consider approximations that reduce the multivariate randomness to univariate randomness. These approximations are used to determine buy-and-hold strategies that optimize, for a given probability level, the Value at Risk and the Conditional Left Tail Expec-tation of the distribution function of final wealth. Read the rest of this entry »
