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On the net present value distribution affected by a random walk process

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  • Grubbström, Robert W.

Abstract

In this paper we attempt to derive properties of the distribution of the net present value NPV, when the underlying cash flow is affected by stochastic disturbances in the form of a random walk process, the disturbances thus jumping continuously between each of two values. A leverage is introduced, affecting the size of each jump in relation to time.

Suggested Citation

  • Grubbström, Robert W., 2022. "On the net present value distribution affected by a random walk process," International Journal of Production Economics, Elsevier, vol. 250(C).
    • Handle: RePEc:eee:proeco:v:250:y:2022:i:c:s0925527322002687
    DOI: 10.1016/j.ijpe.2022.108686
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    References listed on IDEAS

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    1. Frederick S. Hillier, 1963. "The Derivation of Probabilistic Information for the Evaluation of Risky Investments," Management Science, INFORMS, vol. 9(3), pages 443-457, April.
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    3. David Bogataj & Marija Bogataj, 2019. "NPV approach to material requirements planning theory – a 50-year review of these research achievements," International Journal of Production Research, Taylor & Francis Journals, vol. 57(15-16), pages 5137-5153, August.
    4. Creemers, Stefan, 2018. "Moments and distribution of the net present value of a serial project," European Journal of Operational Research, Elsevier, vol. 267(3), pages 835-848.
    5. Stefan Creemers, 2018. "Moments and distribution of the net present value of a serial project," Post-Print hal-01914841, HAL.
    6. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
    7. Miller, Virgil V. & Anderson, Leslie P. & Josephs, Spencer S., 1972. "Abstract: A Probability Distribution of Discounted Payback for Evaluating Investment Decisions," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 7(2), pages 1439-1442, March.
    8. Jevons, William Stanley, 1871. "The Theory of Political Economy," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number jevons1871.
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