Sunk costs play a central role in antitrust economics but are often misunderstood and mismeasured. This chapter clarifies some of the conceptual and empirical issues related to sunk costs, and explains their implications for antitrust analysis. The chapter is particularly concerned with the role of uncertainty. When market conditions evolve unpredictably (as they almost always do), firms incur ...

Several organisations in the upstream petroleum industry have begun to incorporate the cost of dealing with greenhouse gas (GHG) emissions into their project evaluation processes. The risks due to these costs, like many other petroleum project risks, involve long lead times demanding a flexible response. Moreover, the patterns of risks in these costs are complex and different from other more st...

This report proposes a method to price spread options on stochastically correlated underlying assets. Therefore it provides a more realistic approach towards correlation structure. We generalize a constant correlation tree model developed by Hull (2002) and extend it by the notion of stochastic correlation. The resulting tree model is recombining and easy to implement. Moreover, the numerical c...

The paper is devoted to optimal superreplication of European options in the discrete setting under proportional transaction costs on the underlying asset. In particular, general pricing and hedging algorithms are developed. This extends previous work by many authors, which has been focused on the binomial tree model and options with specific payoffs such as calls or puts, often under certain bo...

Over many years, there has been a drive in the electricity industry towards better integration of environmentally friendly and renewable generation resources for power systems. Such show ...