Although methods to assess real option value embedded in economic projects have been around for a long time, they have been largely dismissed in practice because real world problems quickly lead to what is called the curse of dimensionality. Lin Zhao’s research focuses on one approach that could provide a solution. This is a dimension reduction approach for the valuation of American options, which can also be successfully applied to the stochastic dynamic programming problems that arise in complex, high dimensionality real option value assessment.
L. Zhao: Making Real Options Credible: Incomplete Markets, Dynamics, and Model Ambiguity.
Prof. S.J.G. van Wijnbergen
This event is open to the public.