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Economics

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An exact solution for the investment and value of a firm facing uncertainty, adjustment costs, and irreversibility

Article Abstract:

A closed-form solution model obtained from assumptions that a firm has a constant-returns-to-scale production technology and convex costs of investments, provides solutions to optimal investment and value of a competitive firm under uncertainty. This model computes investments and values in a reversible and irreversible investment case. The result is a marginal operating profit of capital that is invariant to the capital stock for non-monopolistic firms, and a marginal operating profit capital that is decreasing in the capital stock for monopolistic firms.

Asset & Risk Management, Analysis, Economic aspects, Risk (Economics), Investments, Irreversible processes, Irreversible processes (Thermodynamics), Cost (Economics), Costs (Economics)

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'Mode-locking' and international business cycle transmission

Article Abstract:

The role of the 'mode-locking' effect, a nonlinear process that results in synchronization of oscillations in the oscillating systems through weak coupling between the systems, in international business cycle formation was investigated. Simulations and econometric analyses were conducted to verify this hypothesis. Results showed that mode-locking indeed plays a major role in world business cycle synchronization and the business cycle. Mode-locking synchronizes the fluctuations from two or more separate oscillators.

International economic relations, Business cycles

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Products of trees for investment analysis

Article Abstract:

A product representation technique featuring products of binomial trees for use in simultaneous management of several risky assets is presented and evaluated. The technique goes around the disproportional representation of products by presenting a condition of the marginal utility being optimally independent thus resulting in the proper defining of risk neutral probabilities in the product tree.

Research and Development in the Physical, Engineering, and Life Sciences, Statistics, Methods, Risk management, Mathematical models, Statistics (Mathematics)

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