based on introducing stochastic idiosyncratic cash flow risk into an equity valuation model of firms with growth options …. Within our model, a firm's systematic risk depends on the delta of its growth option. The growth option's delta is lower when … idiosyncratic volatility rises, driving down the firm's systematic risk and hence its expected return - firms with higher …

, by incorporating the conditional value at risk (CVaR), the risk induced by uncertain demand is explicitly considered. The …