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  • Open Daily: 10am - 10pm
    Alley-side Pickup: 10am - 7pm

    3038 Hennepin Ave Minneapolis, MN
    612-822-4611

Open Daily: 10am - 10pm | Alley-side Pickup: 10am - 7pm
3038 Hennepin Ave Minneapolis, MN
612-822-4611
Real Options Valuation: The Importance of Stochastic Process Choice in Commodity Price Modelling

Real Options Valuation: The Importance of Stochastic Process Choice in Commodity Price Modelling

Schöne, Max

Paperback

Series: Bestmasters

Business GeneralInvesting & FinanceManagement

ISBN10: 3658074922
ISBN13: 9783658074920
Publisher: Springer Nature
Published: Oct 10 2014
Pages: 104
Weight: 0.37
Height: 0.28 Width: 5.83 Depth: 8.27
Language: English
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.

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