The Worst Case for Real Options
By M. Trojanowska, P. M. Kort. 2010
59 citations recorded by the source corpus.
The problem of the timing of an investment decision under partial information is analyzed in a framework where the firm is ambiguity averse. The analysis yields the description of a robust decision rule for an investment in a finite life project in presence of a stochastic instantaneous return. It is demonstrated that ambiguity aversion may accelerate investment in the short run. Ex post validation of the determined investment policy treats the impact of ambiguity aversion on the proper way of discounting of the profit flow resulting from the project and the fair price of risk associated with ambiguity aversion.
Subfields: Economics and Econometrics, Finance
View Paper: https://www.semanticscholar.org/paper/4efb8a6d05edc4c648053c0baee3f84297d96520
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In Economics and Econometrics
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Citations in the corpus
- Optimal stopping under ambiguity in continuous time (2013, background): “Nishimura and Ozaki [32] (see also [47]) study the optimal entry decision of a firm into a new market when future operating profits are uncertain.”