Investment decisions with two-factor uncertainty

Artikel

This paper considers investment problems in real options with non-homogeneous two-factor uncertainty. We derive some analytical properties of the resulting optimal stopping problem and present a finite difference algorithm to approximate the firm's value function and optimal exercise boundary. An important message in our paper is that the frequently applied quasi-analytical approach underestimates the impact of uncertainty. This is caused by the fact that the quasi-analytical solution does not satisfy the partial differential equation that governs the value function. As a result, the quasi-analytical approach may wrongly advise to invest in a substantial part of the state space.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Journal: Journal of Risk and Financial Management ; ISSN: 1911-8074 ; Volume: 14 ; Year: 2021 ; Issue: 11 ; Pages: 1-17 ; Basel: MDPI

Klassifikation und Themen

• Klassifikation: Wirtschaft
• Thema: investment analysis ; optimal stopping time problem ; two-factor uncertainty

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Compernolle, Tine ; Huisman, Kuno J. M. ; Kort, Peter M. ; Lavrutich, Maria ; Nunes, Cláudia ; Thijssen, Jacco J. J.
• Ereignis: Veröffentlichung
• (wer): MDPI
• (wo): Basel
• (wann): 2021

Weitere Informationen

• DOI: doi:10.3390/jrfm14110534
• Handle: http://hdl.handle.net/10419/258637
• Letzte Aktualisierung: 10.03.2025, 11:41 MEZ