This paper models political risk in international capital budgeting by utilising stochastic calculus. We assume that expropriation events are Poisson distributed across time and that the exchange rate follows a geometric Brownian motion process. The solution to our model is closed form. Examples...

Although many studies have been undertaken on the cost of capital, insufficient attention has been paid to the factors that drive the cost of capital in the emerging markets, in particular the Middle East region. Here, an analysis is undertaken of the cost of capital in Egypt, based on a sample...