We study a two-stage R&D project with an abandonment option. Two types of uncertainty influence the decision to start R&D. Demand uncertainty is modelled as a lottery between a proportional increase and decrease in demand. Technical uncertainty is modelled as a lottery between a decrease and...

We study a two-stage R&D project with an abandonment option. Two types of uncertainty influence the decision to start R&D. Demand uncertainty is modelled as a lottery between a proportional increase and decrease in demand. Technical uncertainty is modelled as a lottery between a decrease and...

We provide a strategic rationale for growth options under uncertainty and imperfect competition. In a market with strategic competition, investment confers a greater capability to take advantage of future growth opportunities. This strategic advantage leads to the capture of a greater share of...

We provide a strategic rationale for growth options under uncertainty and imperfect corn-petition. In a market with strategic competition, investment confers a greater capability to take advantage of future growth opportunities. This strategic advantage leads to the capture of a greater share of...

This paper considers a representative firm taking investment decisions in a high-tech environment where different generations of products are invented over time. First, we develop a real options investment model in which, according to standard practice, the sales price and the unit production...

The conventional wisdom that house prices are the present value of future rents ignores the fact that rents are not discretionary as in dividends on stocks. Housing price uncertainty can affect household property investment, which in turn affects rent. By extending the theory of investment under...

Our main goal is to study the development of biodiesel as a renewable energy source in Brazilian reality. Specifically, we shall discuss the flexibility between traditional diesel and biodiesel. It will be evaluated the option pricing of a diesel-run device where it is possible to use diesel or...

In this paper we investigate the economic viability of geothermal district heating networks using both net present value (NPV) and real options analysis (ROA). We give an introduction to geothermal energy technologies and review the relevant ROA literature focusing on applications in similar...

This paper presents an economic interpretation of the optimal “stopping” of perpetual project opportunities under both certainty and uncertainty. Prior to stopping, the expected rate of return from delay exceeds the rate of interest. The expected rate of return from delay is the sum of the...

In this paper, we apply a spread-based real options approach to analyze the decision-making problem of an investor who has the choice between an irreversible investment in a condensing power plant without heat utilization and a plant with combined heat-and-power (CHP) generation. Our...