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Irreversible Investment under Lévy Uncertainty : An Equation for the Optimal Boundary

Ferrari, Giorgio - 2014

We derive a new equation for the optimal investment boundary of a general irreversible investment problem under exponential Lévy uncertainty. The problem is set as an infinite time-horizon, two-dimensional degenerate singular stochastic control problem. In line with the results recently...

Persistent link: https://www.econbiz.de/10013043056

Stochastic Idiosyncratic Cash Flow Risk and Real Options : Implications for Stock Returns

Bhamra, Harjoat Singh - 2016

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 …

Persistent link: https://www.econbiz.de/10013007739

Volume Uncertainty in Construction Projects : A Real Options Approach

Ribeiro, João Adelino - 2019

The levels of uncertainty surrounding construction projects are particularly high and construction managers should be aware that adequately managing the effects of the different types of uncertainty may lead to an increase in the overall performance of construction companies. The model proposed...

Persistent link: https://www.econbiz.de/10012905341

Real Options Valuation Under Uncertainty

Lambert, Marie - 2016

model accounts for two different sources of uncertainty, those are technical and economic risk. This model incorporates a …

Persistent link: https://www.econbiz.de/10013003948

Property Investment and Rental Rates Under Housing Price Uncertainty : A Real Options Approach

Wang, Honglin - 2015

The conventional wisdom that housing prices are the present value of future rents ignores the fact that rents are not discretionary as in dividends on stocks. Housing price uncertainty can affect household property investment, which in turn affects rent. By extending the theory of investment...

Persistent link: https://www.econbiz.de/10013034654

Real Options Valuation with Multiple Uncertainties Using K-Dimensional Models

Zapata Quimbayo, Carlos - 2021

The binomial model presents a set of properties that make it a suitable approach in order to value the real options, throughout an easy and practical application. This is possible by the adaptation of the valuation principle for non-arbitrage, own of the options pricing theory. However, their...

Persistent link: https://www.econbiz.de/10013230701

Real Options and the Cross-Section of Expected Stock Returns

Guthrie, Graeme A. - 2013

This paper surveys the theoretical literature investigating the effect of firms' investment flexibility on the cross-section of expected stock returns. Real options analysis derives firms' value-maximizing investment policies as functions of exogenous fundamental drivers of profitability and...

Persistent link: https://www.econbiz.de/10013090291

Inflexibility and Stock Returns

Gu, Lifeng - 2019

Investment-based asset pricing research highlights the role of irreversibility as a determinant of firms' risk and … flexibility (i.e., contraction and expansion options) is to determine the relation between risk and operating leverage: risk … these characteristics in stock returns and risk …

Persistent link: https://www.econbiz.de/10012901117

Valuation of contractual assets using statistical simulation

Vlachý, Jan - In: Contemporary economics 10 (2016) 2, pp. 153-162

This paper develops a dynamic option-based model for the valuation of rental and other similarly structured lease contracts under the conditions of uncertainty that is then solved by statistical simulation (Monte Carlo). The motivation, research background and methodology of the paper follow up...

Persistent link: https://www.econbiz.de/10011515817

Implementing real options valuation under macroeconomic risk and normally distributed cash flows

Instefjord, Norvald; Kenç, Turalay - In: International econometric review 16 (2024) 1, pp. 50-67

business cycle risk and normally distributed cash flows. The problems considered include (i) estimating empirical distribution …

Persistent link: https://www.econbiz.de/10015375466