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Consumption Utility-Based Pricing and Timing of the Option to Invest with Partial Information

Yang, Zhaojun - 2010

This paper extends real options theory to consider the situation where the mean appreciation rate of the value of an irreversible investment project is not observable and governed by an Ornstein-Uhlenbeck process. Our main purpose is to analyze the impact of the uncertainty of the mean...

Persistent link: https://www.econbiz.de/10013147390

Irreversible Investments and Ambiguity Aversion

Cartea, Álvaro - 2017

uncertainty in the investment or a hedging asset …

Persistent link: https://www.econbiz.de/10012975616

Learning, pricing, timing and hedging of the option to invest for perpetual cash flows with idiosyncratic risk

Song, Dandan; Wang, Huamao; Yang, Zhaojun - In: Journal of mathematical economics 51 (2014), pp. 1-11

Persistent link: https://www.econbiz.de/10010478603

Strategic Technology Switching Under Risk Aversion and Uncertainty

Sendstad, Lars H. - 2018

Sequential investment opportunities or the presence of a rival typically hasten investment under risk neutrality. By contrast, greater price uncertainty or risk aversion increase the incentive to postpone investment in the absence of competition. We analyse how price and technological...

Persistent link: https://www.econbiz.de/10012932871

Optimal Hedging of a Contingent Claim with Ambiguity Aversion

Hyun, Chongseok - 2012

We propose a model of hedging and investment with ambiguity aversion in an incomplete financial market. We show that … hypothesis: an ambiguity averse agent chooses higher volatility when hedging a derivative position whose payoff function is … convex than when hedging a position whose payoff function is concave. Our model can be extended to accommodate non …

Persistent link: https://www.econbiz.de/10013103139

Would Ambiguity Averse Investors Hedge Risk in Equity Markets?

Gertsman, Gleb - 2020

This paper studies the conjecture that investors prefer derivative markets over the equity market when hedging risks …

Persistent link: https://www.econbiz.de/10012846419

Decision making in incomplete markets with ambiguity : a case study of a gas field acquisition

Zhao, Lin; Wijnbergen, Sweder van - 2014

We apply utility indifference pricing to solve a contingent claim problem, valuing a connected pair of gas fields where the underlying process is not standard Geometric Brownian motion and the assumption of complete markets is not fulfilled. First, empirical data are often characterized by...

Persistent link: https://www.econbiz.de/10010465169

Threshold theory : modelling risk attitude

Kasprowicz, Tomasz; Bednorz, Andrzej - In: E-Finanse : finansowy kwartalnik internetowy 13 (2017) 4, pp. 97-109

In this paper we offer an alternative framework for examining why risk matters in the decisions of economic agents, and how the agent’s risk attitude affects his decisions. This “Threshold Theory” framework is based on a real options approach and the observation that in many situations an...

Persistent link: https://www.econbiz.de/10011900005

Business uncertainty in developing and emerging economies

Avalos, Edgar; Barrero, Jose Maria; Davies, Elwyn; … - 2024

We study business uncertainty in high- versus low-volatility environments by surveying over 31,000 managers across 41 countries. We elicit subjective probability distributions for future own-firm sales and measure firm-level uncertainty with their mean absolute deviations. Analogously, we...

Persistent link: https://www.econbiz.de/10015071152

Heterogeneous parameter uncertainty and the timing of investment during crisis

Ni, Shawn X.; Ratti, Ronald A. - 2009

We present a model in which investors observe the same macroeconomic data but have varying levels of information about the parameters that determine the distribution of the expected returns on investment. During a crisis that increases macroeconomic uncertainty and reduces asset prices, the...

Persistent link: https://www.econbiz.de/10003905028