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Getting real with real options
Journal article

Getting real with real options

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.

Authors

Grasselli MR

Journal

, , ,

Publication Date

April 13, 2006

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