Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - Option theory and modeling under uncertainty
AU - Christiansen, Daniel
AU - Wallace, S W
PY - 1998/8
Y1 - 1998/8
N2 - Within the framework of some simple models, we explain how option theory can enhancethe understanding and teaching of modeling under uncertainty. We discuss some commonpitfalls in modeling and argue that these result from a failure to come to grips with optionsand flexibility. We examine a dynamic programming approach to evaluating options and avaluation by arbitrage approach and end by comparing the two approaches with respect tohow they treat time and risk.
AB - Within the framework of some simple models, we explain how option theory can enhancethe understanding and teaching of modeling under uncertainty. We discuss some commonpitfalls in modeling and argue that these result from a failure to come to grips with optionsand flexibility. We examine a dynamic programming approach to evaluating options and avaluation by arbitrage approach and end by comparing the two approaches with respect tohow they treat time and risk.
U2 - 10.1023/A:1018991509947
DO - 10.1023/A:1018991509947
M3 - Journal article
VL - 82
SP - 59
EP - 82
JO - Annals of Operations Research
JF - Annals of Operations Research
SN - 0254-5330
IS - 1
ER -