Real Options under Choquet-Brownian Ambiguity
Real options models characterized by the presence of ambiguity have been recently proposed. But based on recursive multiple-priors approaches to solve ambiguity, these seminal models reduce individual preferences to extreme pessimism by considering only the worst case scenario. In contrast, by relying on dynamically consistent Choquet-Brownian motions to model the dynamics of ambiguous expected cash flows, we show that a much broader spectrum of attitudes towards ambiguity may be accounted for. In the case of a perpetual real option to invest, ambiguity aversion delays the moment of exercise of the option, while the opposite holds true for an ambiguity lover.
|Date of creation:||08 Nov 2010|
|Date of revision:|
|Note:||View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00534027/en/|
|Contact details of provider:|| Web page: https://hal.archives-ouvertes.fr/|
When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:halshs-00534027. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD)
If references are entirely missing, you can add them using this form.