This paper examines strategic investment in the context of a duopolistic continuous-time real options game. Our contribution is twofold, economic and methodological. The former is the recognition that, under fixed costs of investment and time-to-build, the firm pays a fraction of the implicit...

We consider a firm that operates a single plant and has an expansion option to invest in a new plant. This setup leads to two-sided optimal stopping problems. We analyze optimal expansion timing and quantify the value of the loan commitment that the equityholder obtained from the lender and...

This article discusses the effects of judicial uncertainty over investments in stock bonds, and the Securities and Exchange Commission of Brazil (CVM) role in assuring certainty to investors.The article goes with an empirical investigation about the certainty provided by specialized commercial...

We analyze the financing of an expansion project, as well as the pre-expansion capital structure decision. Using too much equity (debt) in the expansion financing results in under (over)-investment relative to the first-best (total firm value maximizing) policy. We identify the expansion...

This paper investigates strategic investment policies in a duopolistic continuous-time real options game. Our contribution is twofold, economic and methodological. The former is the recognition that, under fixed costs of investment and time-to-build, a firm's exercise of its capital-replacement...

Value-at-Risk and Conditional Tail Expectations are central tools of modern risk management. As risk measures based on the actual probability distribution, these can eventually decrease with the investment horizon. This is not evidence that stock investments are decreasingly risky in the...

Maintaining a competitive edge requires a firm to replace deteriorating business lines with new projects. Accordingly, part of a firm's value resides in its ability to exploit new opportunities. This article incorporates adaptation into Ohlson's residual income valuation framework and obtains a...

In their article 'An Arbitrage-Free Approach to Quasi-Option Value' [J. Environm. Econom. Management 35, 103-125, 1998], Coggins and Ramezani interpreted the concept of quasi-option value - introduced by Arrow and Fisher [Quart. J. Econom. 88, 1974, 312-319] - as being identical to Dixit and...

Fisher [Resource Energy Econ. 22, 197-204 (2000)] offers a unifying framework for two concepts of (quasi-) option value suggested by Arrow, Fisher, Hanemann, and Henry (AFHH) on the one hand, and by Dixit and Pindyck (DP) on the other, and claims these two concepts to be equivalent. We show that...

Real options reasoning assumes timely and effective managerial decision-making yet does not address managers' ability to provide it. An attention-based view describes managerial behavior under varying structural conditions. I examine real options reasoning from an attention-based view. I develop...