We study the decision of when to invest in an indivisible project whose value is perfectly observable but driven by a parameter that is unknown to the decision maker ex ante. This problem is equivalent to an optimal stopping problem for a bivariate Markov process. Using filtering and martingale...

We focus on structural models in corporate finance with roll-over debt structures in the vein of Leland (1994) and Leland and Toft (1996). We show that these models incorrectly assume that the optimal default is defined by the first time such that the firm's assets reaches a sufficiently low...

We study the decision of when to invest in an indivisible project whose value is perfectly observable but driven by a parameter that is unknown to the decision maker ex ante. This problem is equivalent to an optimal stopping problem for a bivariate Markov process. Using filtering and martingale...

We study the problem of a risk-neutral decision-maker who has to choose among two alternative investment projects of different scales under output price uncertainty. We provide parameter restrictions under which the optimal investment strategy is not a trigger strategy and the optimal investment...

An ambiguous statistical experiment is a set of joint probability distributions over states and signals. This note compares ambiguous experiments from the point of view of an ambiguity averse decision maker and extends the Blackwell (1951, 1953) ordering to this setting.