Uncertain dynamics,correlation effects,and robust investment decisions |
| |
| Affiliation: | 1. Faculty of Mathematics and Information Science, Warsaw University of Technology, Poland;2. Institute of Applied Mathematics and Mechanics, University of Warsaw, Poland;1. Centre for Wireless Communications (CWC), P.O. Box 4500, FI-90014 University of Oulu, Finland;2. Department of Computer and Information Science, Linköping University, SE-581 83 LINKÖPING, Sweden;3. SCA Research Lab, ITMO University, St. Petersburg, 197101, Russia;4. Center for Ubiquitous Computing (UBICOMP), P.O. Box 4500, FI-90014 University of Oulu, Finland;1. Department of Social Science, New York City College of Technology, The City University of New York, 300 Jay Street, Brooklyn, NY, 11201, USA;2. Economics Department, The New School for Social Research, The New School, 65 Fifth Avenue, New York, NY, 10003, USA |
| |
| Abstract: | We analyze a firm׳s investment problem when the dynamics of project value and investment cost are uncertain. We provide an explicit solution using a robust method for an ambiguity averse firm taking this into account. Ambiguity aversion regarding a common risk factor impacts differently than ambiguity aversion regarding investment cost residual risk. Correlation between project value and investment cost matters; ambiguity aversion regarding common risk can decrease the investment probability only if correlation is positive. Ambiguity aversion regarding residual risk always increases the investment probability. When only project value is risky, volatility can monotonically decrease the investment threshold; this does not hold with the multiple prior method. |
| |
| Keywords: | Real options Ambiguity Risk/uncertainty effects Correlation effects Investment timing |
| 本文献已被 ScienceDirect 等数据库收录！ |
|
