Urban structures and urban growth rates are highly persistent. This has far-reaching implications for the optimal size and timing of new construction. We prove that rational developers postpone construction not because prospects are gloomy, but because they are bright. The slow mean reversion in...

Classic real options theory rests on two debatable assumptions: projects require a fixed investment and generate cash flows that follow a random walk. Relaxing both assumptions leads to radically different conclusions regarding the optimal timing of investment. We model investment using a...

Urban structures and urban growth rates are highly persistent. This has far-reaching implications for the optimal size and timing of new construction. We prove that rational developers postpone construction not because prospects are gloomy, but because they are bright. The slow mean reversion in...

This article presents a new filter for state-space models based on Bellman's dynamic programming principle applied to the posterior mode. The proposed Bellman filter generalises the Kalman filter including its extended and iterated versions, while remaining equally inexpensive computationally....

We consider the problem of tracking latent time-varying parameter vectors under model misspecification. We analyze implicit and explicit score-driven (ISD and ESD) filters, which update a prediction of the parameters using the gradient of the logarithmic observation density (i.e., the score). In...

This article establishes the Poisson optional stopping times (POST) method by Lange et al. (2020) as a near-universal method for solving liquidity-constrained American options, or, equivalently, penalised optimal-stopping problems. In this setup, the decision maker is permitted to "stop", i.e....