In this paper we explore ways that alleviate problems of nonparametric (artificial neural networks) and parametric option pricing models by combining the two. The resulting enhanced network model is compared to standard artificial neural networks and to parametric models with several historical...

We demonstrate to decision makers how to optimally make costly strategic pre-investment R&D decisions in the presence of spillover effects in an option pricing framework with analytic tractability. Decisions are modeled as impulse-type controls with random outcome. Two firms face two decisions...