We solve a firm's investment problem when there is uncertainty about the growth rate of the project value and the investment cost, and the firm is ambiguity averse. We use a robust method to take this into account and provide explicit solution to the value of the option to invest. Ambiguity...

This paper considers a model where both market liquidity and funding liquidity depend on the information in the market. Speculators are constrained by margins on their positions, the margins are set by financiers, who has less information than the speculators. The paper shows how this can result...

We analyze a firm׳s investment problem when the dynamics of project value and investment cost are uncertain. We provide an explicit solution using a robust method for an ambiguity averse firm taking this into account. Ambiguity aversion regarding a common risk factor impacts differently than...