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Investment timing with fixed and proportional costs of external financing
Nishihara, Michi; Sshibata, Takashi - Graduate School of Economics, Osaka University - 2011
We develop a dynamic model in which a firm exercises an option to expand production with cash balance and costly external funds. While related papers explain their results only by numerical examples, we analytically prove the following results. In the presence of only a proportional cost of...
Persistent link: https://www.econbiz.de/10009372412
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Using real option analysis to quantify ethanol policy impact on the firm's entry into and optimal operation of corn ethanol facilities
Maxwell, Christian; Davison, Matt - In: Energy Economics 42 (2014) C, pp. 140-151
Ethanol crush spreads are used to model the value of a facility which produces ethanol from corn. A real option analysis is used to investigate the effects of model parameters on the related managerial decisions of (i) how to operate the facility through optimal switching from idled to...
Persistent link: https://www.econbiz.de/10010868724
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How much should we pay for interconnecting electricity markets? A real options approach
Cartea, Álvaro; González-Pedraz, Carlos - In: Energy Economics 34 (2012) 1, pp. 14-30
financial terms, the value of an interconnector is the same as a strip of real options written on the spread between power …-reverting jump process and express the value of these real options in closed-form. The valuation tool is applied to five pairs of …
Persistent link: https://www.econbiz.de/10011039669
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Growth to value: Option exercise and the cross section of equity returns
Ai, Hengjie; Kiku, Dana - In: Journal of Financial Economics 107 (2013) 2, pp. 325-349
-to-market characteristics. We model two primitive assets: value assets and growth assets that are options on assets in place. The cost of option … place. Consequently, growth options are less risky than value assets, and the model features a value premium. Our model …
Persistent link: https://www.econbiz.de/10010616813