We present a methodology to estimate fixed cost parameters relevant to the decision to operate, mothballor retire an open-cycle gas turbine (OCGT) using a dynamic discrete choice model, based on fuel andelectricity prices, as well as technical data and the operational status of OCGTs in the PJM...

The curse of dimensionality problem refers to a set of troubles arising when dealing with huge amount of data as happens, e.g., applying standard numerical methods to solve partial differential equations related to financial modeling. To overcome the latter issue, we propose a Deep Learning...

We study two credit risk models with occupation time and liquidation barriers: the structural model and the hybrid model with hazard rate. The defaults within the models are characterized in accordance with Chapter 7 (a liquidation process) and Chapter 11 (a reorganization process) of the U.S....

In this paper, we introduce a 3D finite dimensional Gaussian process (GP) regression approach for learning arbitrage-free swaption cubes. Based on the possibly noisy observations of swaption prices, the proposed 'constrained' GP regression approach is proven to be arbitrage-free along the strike...

I introduce a finite-difference solution method based on the envelope condition in continuous-time stochastic dynamic programming problems. The envelope method is easier to code and, in the presence of occasionally binding constraints, faster and more stable than popular methods based on the...

Purpose: The purpose of this study is to investigate how ambiguity faced by the risk-neutral manager affects the firm’s optimal level of safety stock. Design/methodology/approach: This study adopts the traditional model of Arrow et al. (1951) and employ a manager who has multiple prior beliefs...

The (R, s, S) is a stochastic inventory control policy widely used by practitioners. In an inventory system managed according to this policy, the inventory is reviewed at instant R; if the observed inventory position is lower than the reorder level s an order is placed. The order’s quantity is...

We show that illiquidity risk matters for asset pricing independently of the specific functional form of the asset pricing model. Employing an out-of-sample non-parametric stochastic discount factor (SDF), that we estimate from portfolio returns of the US equity market, we find that market-wide...