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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

Multi-stage product development with exploration, value-enhancing, preemptive and innovation options

Koussis, Nicos; Martzoukos, Spiros H.; Trigeorgis, Lenos - In: Journal of Banking & Finance 37 (2013) 1, pp. 174-190

We provide a real options framework for the analysis of product development that incorporates research and exploration … actions, product attribute value-enhancing actions with uncertain outcome, as well as preemption and innovation options. We …

Persistent link: https://www.econbiz.de/10010591917

Real options and earnings-based bonus compensation

Huang, Hsing-Hua; Huang, Hongming; Shih, Pai-Ta - In: Journal of Banking & Finance 36 (2012) 8, pp. 2389-2402

This study extends the works of Mauer and Sarkar (2005) and Andrikopoulos (2009) by incorporating a regime-dependent earnings-based bonus into managerial compensation. Examining the individual effects of ownership shares and earnings-based bonus compensation, we find that the former provides...

Persistent link: https://www.econbiz.de/10010599643

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

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