This paper exploits the early exercise premium representation to investigate strate- gic investment policies in a duopolistic continuous-time real options game. Assuming exogenous firm roles, we find that (i) as the leader installs its newly purchased capital, the follower's optimal investment...

This paper examines strategic investment in the context of a duopolistic continuous- time real options game. Our contribution is twofold, economic and methodological. The former is the recognition that, under ?xed costs of investment and time-to-build, the ?rm pays a fraction of the implicit...

We o¤er clari?cations on Cooley-Quadrini (2001) as regards ?nancial frictions and risky corporate-debt pricing. Even in a frictionless world, the promised rate on corpo- rate debt is not identical across ?rms and across capital structures and it is not equal to the risk-free market interest...

While as a matter of pure chance and mathematical manipulations, the Black- Scholes formula could have been accidentally obtained much earlier by making use of put-call parity, a simple thought experiment demonstrates the inconclusiveness of any such derivation as regards the validity of the...

We offer clarifications on Cooley and Quadrini (2001) regarding financial frictions and risky corporate debt pricing. Even in a frictionless world, the promised rate on corporate debt is not identical across firms and across capital structures and it is not equal to the risk-free rate. Frictions...

This paper investigates strategic investment policies in a duopolistic continuous-time real options game. Our contribution is twofold, economic and methodological. The former is the recognition that, under fixed costs of investment and time-to-build, a firm's exercise of its capital-replacement...