This paper studies the investment timing problem of an entrepreneur with a non- tradable real option with undiversifiable risk. We find that the time preference can have a significant impact on the risk attitude toward the idiosyncratic risk, which re- sults from the wealth effect on the implied...

This study investigates irreversible investment decisions when the exercise payoff is scale-dependent; thus, it is endogenously determined by the firm's risk management. We find that the scale-dependency gives rise to a speculative risk management strategy: a positive relationship between the...

This paper studies a model of irreversible investment decisions in which the exercise payoff is endogenously determined by the firm's risk management choice. By obtaining the explicit solution of a non-linear free boundary problem with a stochastic control, we present the implications for the...