Title
The worst case for real options The worst case for real options
Author
Faculty/Department
Faculty of Applied Economics
Publication type
article
Publication
New York, N.Y. ,
Subject
Economics
Computer. Automation
Source (journal)
Journal of optimization theory and applications. - New York, N.Y.
Volume/pages
146(2010) :3 , p. 709-734
ISSN
0022-3239
ISI
000282708600009
Carrier
E
Target language
English (eng)
Full text (Publishers DOI)
Affiliation
University of Antwerp
Abstract
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.
E-info
https://repository.uantwerpen.be/docman/iruaauth/cb49ff/77e6b6cc6c2.pdf
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Handle