Real Options Valuation: The Importance of Stochastic Process Choice in Commodity Price Modelling (Paperback) (ISBN-13: 9783658074920)

The Author shows that modelling the uncertain cash flow dynamics of an investment project deserves careful attention in real options valuation. Focusing on the case of commodity price uncertainty, a broad empirical study reveals that, contrary to common assumptions, prices are often non-stationary and exhibit non-normally distributed returns. Subsequently, more realistic stochastic volatility, jump diffusion, and Lévy processes are evaluated in the context of a stylised investment project. The valuation results suggest that stochastic process choice can have substantial implications for valuation results and optimal investment rules.

Author: Max Schöne
ISBN-10: 3658074922
ISBN-13: 9783658074920
Publisher: Springer Gabler
Language: English
Published: 10/10/2014
Pages: 104
Format: Paperback
Weight: 0.37lbs
Size: 8.27h x 5.83w x 0.28d