BIROn - Birkbeck Institutional Research Online

    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)

    [img] Text
    Comment paper.pdf - Author's Accepted Manuscript
    Restricted to Repository staff only until 28 October 2021.
    Available under License Creative Commons Attribution Non-commercial No Derivatives.

    Download (60kB)


    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.


    Item Type: Article
    Keyword(s) / Subject(s): Ambiguity, dynamic consistency, real options, NMEU preferences, rectangularity, optimal stopping
    School: School of Business, Economics & Informatics > Economics, Mathematics and Statistics
    Depositing User: David Schroeder
    Date Deposited: 29 Apr 2020 15:47
    Last Modified: 23 Jun 2021 06:52


    Activity Overview

    Additional statistics are available via IRStats2.

    Archive Staff Only (login required)

    Edit/View Item Edit/View Item