Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5099543 | Journal of Economic Dynamics and Control | 2011 | 16 Pages |
Abstract
The present article provides a novel framework for analyzing option network problems, which is a general class of compound real option problems with an arbitrary combination of reversible and irreversible decisions. The present framework represents the interdependent structure of decisions by using a directed graph. In this framework, the option network problem is formulated as a singular stochastic control problem, whose optimality condition is then obtained as a dynamical system of generalized linear complementarity problems (GLCPs). This enables us to develop a systematic and efficient numerical method for evaluating the option value and the optimal decision policy.
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Takashi Akamatsu, Takeshi Nagae,