Schröder, David (2020) Real options, ambiguity, and dynamic consistency - a technical note. International Journal of Production Economics 229 (107772), ISSN 0925‐5273.
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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 Faculties and Schools > Faculty of Business and Law > Birkbeck Business School |
| Depositing User: | David Schroeder |
| Date Deposited: | 29 Apr 2020 15:47 |
| Last Modified: | 02 Aug 2023 17:59 |
| URI: | https://eprints.bbk.ac.uk/id/eprint/31757 |
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