This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Irreversible Decisions and Record-Setting News Principles

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Svetlana Boyarchenko

Additional information is available for the following registered author(s):

Abstract

In the now-classical real options theory, the price of an underlying asset is modeled as a geometric Brownian motion, and optimal exercise strategies are described by simple explicit formulas. This paper extends the classical theory to allow any geometric Le´vy process to model prices. Such processes may account for fat tails and skewness of probability distributions of commodity prices. The optimal exercise strategies are specified in the paper in terms of statistics of record-setting low or high prices. The formulas derived extend those observed in the Gaussian case, but the form of the result is novel even for that case.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://hdl.handle.net/10.1257/0002828041464452
File Format: text/html
File Function:
Download Restriction: no
File URL: http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=94&issue=3&article=8&issue_date=June2004
File Format: application/pdf
File Function:
Download Restriction: Access to full text is restricted to AEA members.

Publisher Info
Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 94 (2004)
Issue (Month): 3 (June)
Pages: 557-568
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:aea:aecrev:v:94:y:2004:i:3:p:557-568

Contact details of provider:
Email:
Web page: http://www.aeaweb.org/aer/
More information through EDIRC

Order Information:
Web: http://www.aeaweb.org/subscribe.html

For technical questions regarding this item, or to correct its listing, contact: (Christopher F. Baum).

Related research
Keywords:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Angus Deaton & Guy Laroque, 1990. "On The Behavior of Commodity Prices," NBER Working Papers 3439, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Andrew B. Abel & Janice C. Eberly, 1995. "The Effects of Irreversibility and Uncertainty on Capital Accumulation," NBER Working Papers 5363, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Bernanke, Ben S, 1983. "Irreversibility, Uncertainty, and Cyclical Investment," The Quarterly Journal of Economics, MIT Press, vol. 98(1), pages 85-106, February. [Downloadable!] (restricted)
    Other versions:
  4. Andrew B. Abel & Avinash K. Dixit & Janice B. Eberly & Robert S. Pindyck, . "Options, the Value of Capital, and Investment," Rodney L. White Center for Financial Research Working Papers 15-95, Wharton School Rodney L. White Center for Financial Research.
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Svetlana Boyarchenko & Sergei Levendorskii, 2005. "American options: the EPV pricing model," Annals of Finance, Springer, vol. 1(3), pages 267-292, 08. [Downloadable!] (restricted)
    Other versions:
  2. Svetlana Boyarchenko & Sergey Levendorskiy, 2004. "Optimal stopping made easy," Finance 0410016, EconWPA. [Downloadable!]
    Other versions:
  3. Tarun Sabarwal, 2005. "The non-neutrality of debt in investment timing: a new NPV rule," Annals of Finance, Springer, vol. 1(4), pages 433-445, October. [Downloadable!] (restricted)
    Other versions:
  4. Oscar Gutiérrez, 2005. "Real options and the Jorgensonian user cost of capital," Investigaciones Economicas, Fundación SEPI, vol. 29(3), pages 625-630, September. [Downloadable!]
  5. Svetlana Boyarchenko & Sergei Levendorskii, 2005. "Practical guide to real options in discrete time II," Finance 0501014, EconWPA. [Downloadable!]
  6. Svetlana Boyarchenko & Sergei Levendorskii, 2005. "A theory of endogenous time preference, and discounted utility anomalies," Microeconomics 0506005, EconWPA. [Downloadable!]
  7. Sergey Levendorskiy & Svetlana Boyarchenko, 2004. "Practical guide to real options in discrete time," Computing in Economics and Finance 2004 137, Society for Computational Economics. [Downloadable!]
    Other versions:
  8. Luis H. R. Alvarez & Teppo A. Rakkolainen, 2006. "A Class of Solvable Optimal Stopping Problems of Spectrally Negative Jump Diffusions," Discussion Papers 9, Aboa Centre for Economics. [Downloadable!]
  9. Svetlana Boyarchenko & Sergei Levendorskii, 2004. "Real options and the universal bad news principle," Levine's Bibliography 122247000000000430, UCLA Department of Economics. [Downloadable!]
    Other versions:
  10. Svetlana Boyarchenko, 2005. "Buridan's Ass and a Menu of Options," Game Theory and Information 0501006, EconWPA, revised 13 Dec 2005. [Downloadable!]
  11. Svetlana Boyarchenko & Sergei Levendorskii, 2005. "General option exercise rules, with applications to embedded options and monopolistic expansion," Finance 0511001, EconWPA. [Downloadable!]
    Other versions:
  12. Svetlana Boyarchenko & Sergei Levendorskii, 2004. "Practical guide to real options in discrete time," Quantitative Finance Papers cond-mat/0404106, arXiv.org. [Downloadable!]
  13. Svetlana Boyarchenko & Sergei Levendorskii, 2005. "Discount factors ex post and ex ante, and discounted utility anomalies," Microeconomics 0510013, EconWPA, revised 17 Nov 2005. [Downloadable!]
Statistics
Access and download statistics

Did you know? IDEAS is also providing many rankings, for example of authors and institutions.

This page was last updated on 2009-12-13.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.