Sequential investments with stage-specific risks and drifts

Adkins, Roger; Paxson, Dean

doi:10.1080/1351847x.2016.1158728

Cited by 3 publications

(2 citation statements)

References 28 publications

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“…This type of real option provides the flexibility to postpone the investment, allowing the investor to identify the most favorable moment to invest. This option is generally addressed with continuous models ( 47 , 48 ) and simulation methods ( 49 , 50 ).…”

Section: Methodsmentioning

confidence: 99%

Valuation of Infrastructure Projects: Review of the Real Options Literature

Marques

Sánchez

Brandão

et al. 2023

Transportation Research Record: Journal of the Transportation R

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Given the infrastructure sector development and the worldwide trend to grant infrastructure projects to private investors, a growing number of articles in the literature have been devoted to the issue of evaluating this class of investments. To consider the risk and irreversibility of infrastructure investments, researchers have resorted to the real options approach (ROA), which captures the value of managerial flexibility under uncertainty. This article analyzes the research focus, trends, and design found in the literature devoted to the ROA in infrastructure concession project valuation. The results are presented in a quantitative form. They provide insights that may be of value to researchers, project developers, and policymakers who intend to plan and evaluate infrastructure concession projects.

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Section: Methodsmentioning

confidence: 99%

Valuation of Infrastructure Projects: Review of the Real Options Literature

Marques

Sánchez

Brandão

et al. 2023

Transportation Research Record: Journal of the Transportation R

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show abstract

“…This type of real option provides the flexibility to postpone the investment, allowing the investor to identify the most favorable moment to invest. This option is generally addressed with continuous models (Adkins & Paxson, 2017;Saito et al, 2001) and simulation methods (Jeong et al, 2016;Gaudard, 2015).…”

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confidence: 99%

Essays in Infrastructure Economics

MARQUES¹

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Real-Option Valuation in Multiple Dimensions Using Poisson Optional Stopping Times

Lange¹,

Ralph²,

Støre³

2019

J. Financ. Quant. Anal.

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We provide a new framework for valuing multidimensional real options where opportunities to exercise the option are generated by an exogenous Poisson process, which can be viewed as a liquidity constraint on decision times. This approach, which we call the Poisson optional stopping times (POST) method, finds the value function as a monotone sequence of lower bounds. In a case study, we demonstrate that the frequently used quasi-analytic method yields a suboptimal policy and an inaccurate value function. The proposed method is demonstrably correct, straightforward to implement, reliable in computation, and broadly applicable in analyzing multidimensional option-valuation problems.

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Sequential investments with stage-specific risks and drifts

Abstract: Acknowledgements: We thank the two anonymous referees, Michela Altieri (the discussant),

Cited by 3 publications

References 28 publications

Valuation of Infrastructure Projects: Review of the Real Options Literature

Valuation of Infrastructure Projects: Review of the Real Options Literature

Essays in Infrastructure Economics

Real-Option Valuation in Multiple Dimensions Using Poisson Optional Stopping Times

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