Privatization of businesses and flexible investment: a real option approach |
| |
Authors: | Walailuck Chavanasporn Christian-Oliver Ewald |
| |
Institution: | 1. School of Economics and Finance, University of St. Andrews, St. Andrews, Fife, KY16 9AL, UK 2. School of Mathematics and Statistics, University of Sydney, Sydney, Australia 3. Center for Dynamic Macro Economic Analysis, University of St. Andrews, St. Andrews, Fife, KY16 9AL, UK
|
| |
Abstract: | In this article, we study the situation, where the opportunity is given to invest into a government-owned business by partial
privatization to a private company. After payment of an initial installment cost, the private company’s investments are flexible
within a range 0, k] until the business is completed. We model the problem in a real option framework, using geometric mean reversion to describe
the dynamics of the business. We determine the optimal time for the private company to enter and pay the initial installment
cost as well as the optimal dynamic investment strategy that it follows afterward. For the latter, analytic solution cannot
be obtained. We use quadratic splines in order to solve the corresponding dynamic programming problem. Finally, we determine
the optimal degree of privatization in our model from the government’s perspective. |
| |
Keywords: | |
本文献已被 SpringerLink 等数据库收录! |
|