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    Real options, ambiguity, and dynamic consistency - a technical note

    Schröder, David (2020) Real options, ambiguity, and dynamic consistency - a technical note. International Journal of Production Economics , ISSN 0925‐5273. (In Press)

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    Abstract

    Recent research on real options does not only consider optimal investment decisions under risk, but also under ambiguity. However, most models that allow for ambiguity are generally not dynamically consistent. Examples are, among others, the alpha-MEU model, the imprecision aversion model, or the NMEU model. Dynamic consistency is however required to solve optimal stopping real options problems analytically or in closed-form. This paper highlights the resulting difficulties, which are often overlooked, exemplarily for the NMEU model.

    Metadata

    Item Type: Article
    Keyword(s) / Subject(s): Ambiguity, dynamic consistency, real options, NMEU preferences, rectangularity, optimal stopping
    School: Birkbeck Schools and Departments > School of Business, Economics & Informatics > Economics, Mathematics and Statistics
    Depositing User: David Schroeder
    Date Deposited: 29 Apr 2020 15:47
    Last Modified: 07 Jul 2020 21:59
    URI: http://eprints.bbk.ac.uk/id/eprint/31757

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