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Long run value stabilization in a real options perspective

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Author Info
A. Mantovi ()
Abstract

The present value of growth opportunities with stable long run value and decreasing investment cost is addressed in a real options perspective. The model is solved in terms of closed form solutions, and a duality between elementary real options of waiting to invest is conjectured to be a fundamental structure of a forthcoming theory of real options. A pure capital budgeting perspective is pursued. Natural lines for future research are accounted for.

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File URL: http://swrwebeco.econ.unipr.it/RePEc/pdf/I_2009-01.pdf
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Publisher Info
Paper provided by Department of Economics, Parma University (Italy) in its series Economics Department Working Papers with number 2009-EP01.

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Length: 15
Date of creation: 2009
Date of revision:
Handle: RePEc:par:dipeco:2009-ep01

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Related research
Keywords: PVGO; real options; strategic investment; learning;

Find related papers by JEL classification:
D92 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Firm Choice and Growth, Investment, or Financing

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    Other versions:
  3. Steven R. Grenadier, 2002. "Option Exercise Games: An Application to the Equilibrium Investment Strategies of Firms," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 15(3), pages 691-721.
  4. Thomas Arnold & Richard L. Shockley, 2002. "Real Options, Corporate Finance, And The Foundations Of Value Maximization," Journal of Applied Corporate Finance, Morgan Stanley, vol. 15(2), pages 82-88. [Downloadable!] (restricted)
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  6. Robert C. Merton, 1973. "Theory of Rational Option Pricing," Bell Journal of Economics, The RAND Corporation, vol. 4(1), pages 141-183, Spring. [Downloadable!] (restricted)
  7. Roques, Fabien A. & Savva, Nicos, 2009. "Investment under uncertainty with price ceilings in oligopolies," Journal of Economic Dynamics and Control, Elsevier, vol. 33(2), pages 507-524, February. [Downloadable!] (restricted)
  8. Thijssen, Jacco J.J., 2008. "Optimal and strategic timing of mergers and acquisitions motivated by synergies and risk diversification," Journal of Economic Dynamics and Control, Elsevier, vol. 32(5), pages 1701-1720, May. [Downloadable!] (restricted)
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