We consider the timing of replacement of obsolete subsystems within an extensive, complex infrastructure. Such replacement action, known as capital renewal, must balance uncertainty about future profitability against uncertainty about future renewal costs. Treating renewal investments as real...

This paper studies the problem of pricing high-dimensional American options. We propose a method based on the state-space partitioning algorithm developed by Jin et al. (2007) and a dimension-reduction approach introduced by Li and Wu (2006). By applying the approach in the present paper, the...