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This paper investigates the impact of including the risk of fire in an optimal tree harvesting model at the stand level, assuming timber prices follow a mean reverting stochastic process. The relevant partial differential equation is derived under different assumptions about hedging the risk of...
Persistent link: https://www.econbiz.de/10005818075
This paper extends the literature on optimal tree harvesting assuming stochastic prices. With volatile prices, the value of a stand of trees is increased when harvesting dates are flexible, depending on wood volume and product prices of the day. Flexibility adds value because a forest owner can...
Persistent link: https://www.econbiz.de/10005225383