We develop a general filtering framework for the problem of estimating the state of a system whose dynamics is governed by a discrete-time Markov process. We describe applications to inventory control systems with partial observations. We introduce conditional distributions and unnormalized...

Information delays exist in an inventory system when it takes time to collect, process, validate, and transmit inventory/demand data. A general framework is developed in this paper to describe information flows in an inventory system with information delays. We characterize the suffcient...

Among the reasons behind the choice behavior of an individual taking a stochastic form are her potential indifference or indecisiveness between certain alternatives, and/or her willingness to experiment in the sense of occasionally deviating from choosing a best alternative in order to give a...

This paper analyzes the case of a principal who wants to provide an agent with proper incentives to explore a hypothesis that can be either true or false. The agent can shirk, thus never proving the hypothesis, or he can avail himself of a known technology to produce fake successes. This latter...

In this contribution we propose an approach to solve a multistage stochastic programming problem which allows us to obtain a time and nodal decomposition of the original problem. This double decomposition is achieved applying a discrete time optimal control formulation to the original stochastic...

We derive a general formula for the time decay, theta, for out-of-the-money European options on stocks and bonds at expiry, in terms of the density of jumps and payoff. Explicit formulas are derived for the standard put and call options, exchange options in stochastic volatility and local...

A general numerical method for pricing American options in regime switching jump diffusion models of stock dynamics with stochastic interest rates and/or volatility is developed. Time derivative and infinitesimal generator of the process for factors that determine the dynamics of the interest...

Theoretical concepts together with estimation and optimization methods for portfolio choice based on Stochastic Dominance are reviewed. Distinction is drawn between the concepts of Pairwise Dominance, Admissibility, Optimality, Efficiency and Spanning. Results of selected empirical studies and...

The risky assets prices of the bi-variate model are reviewed under the hegemonize concentration filtered physical probability space. In the stochastic variance of the Cox-Ingersoll-Ross process. The Mean-variance hedging expanse on the Föllmer-Schweizer decomposition is stringent to the...

We propose a novel linear approximation of expected utility. The approximation guides us as we transfer the traditional quadratic dependence of third-order stochastic dominance (TSD) into an equivalent linear system. The finding also shows a dual relationship between traditional low partial...