Year: 2006
Type: preprint
Abstract: We apply a utility-based method to obtain the value of a finite-time investment opportunity when the underlying real asset is not perfectly correlated to a traded financial asset. Using a discrete-time algorithm to calculate the indifference price for this type of real option, we present numerical examples for the corresponding investment thresholds, in particular highlighting their dependence with respect to correlation and risk aversion.
Author: Grasselli, M. R
Institution: McMaster University
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2128788030