Optimal Investment under Cost Uncertainty

Autor: Jerome Detemple, Yerkin Kitapbayev
Jazyk: angličtina
Rok vydání: 2018
Předmět:
Zdroj: Risks, Vol 6, Iss 1, p 5 (2018)
Druh dokumentu: article
ISSN: 2227-9091
DOI: 10.3390/risks6010005
Popis: This paper studies the valuation of real options when the cost of investment jumps at a random time. Three valuation formulas are derived. The first expresses the value of the project in terms of a collection of knockout barrier claims. The second identifies the premium relative to a project with delayed investment right and prices its components. The last one identifies the premium/discount relative to a project with constant cost equal to the post-jump cost and prices its components. All formulas are in closed form. The behavior of optimal investment boundaries and valuation components are examined.
Databáze: Directory of Open Access Journals
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