In this paper, we develop approximations that yield insight into the joint optimization of capacity and inventory,and how the optimal inventory policy varies with capacity investment in a single-product, single-station, make-to-stock manufacturing system in which inventory is managed through a...

Much of the work on path-dependent options assumes that the underlying asset price follows geometric Brownian motion with constant volatility. This paper uses a more general assumption for the asset price process that provides a better fit to the empirical observations. We use the so-called...