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A comment on "An arbitrage-free approach to quasi-option value" by Coggins and Ramezani

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  • Mensink, Paul

Abstract

In their article "An Arbitrage-Free Approach to Quasi-Option Value" [J. Environm. Econom. Management 35, 103-125, 1998], Coggins and Ramezani interpreted the concept of quasi-option value introduced by Arrow and Fisher [Quart. J. Econom. 88, 1974, 312-319] as being identical to Dixit and Pindyck's real option value. This means their approach differs from the approach by Fisher and Hanemann [J. Environm. Econom. Management 14, 183-190, 1987] who formalized the concept of quasi-option value a decade before. By indirectly characterizing Dixit and Pindyck's real option value Coggins and Ramezani confirmed classic results in the field of real options theory.

Suggested Citation

  • Mensink, Paul, 2004. "A comment on "An arbitrage-free approach to quasi-option value" by Coggins and Ramezani," Economics Working Papers 2004-06, Christian-Albrechts-University of Kiel, Department of Economics.
    • Handle: RePEc:zbw:cauewp:1937
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    References listed on IDEAS

    as
    1. Sundaresan, S.M., 2000. "Continuous-Time Methods in Finance: A Review and an Assessment," Papers 00-03, Columbia - Graduate School of Business.
    2. Coggins, Jay S. & Ramezani, Cyrus A., 1998. "An Arbitrage-Free Approach to Quasi-Option Value," Journal of Environmental Economics and Management, Elsevier, vol. 35(2), pages 103-125, March.
    3. Vincenzina Messina & Valentina Bosetti, 2003. "Uncertainty and Option Value in Land Allocation Problems," Annals of Operations Research, Springer, vol. 124(1), pages 165-181, November.
    4. Suresh M. Sundaresan, 2000. "Continuous‐Time Methods in Finance: A Review and an Assessment," Journal of Finance, American Finance Association, vol. 55(4), pages 1569-1622, August.
    5. Fisher, Anthony C. & Hanemann, W. Michael, 1987. "Quasi-option value: Some misconceptions dispelled," Journal of Environmental Economics and Management, Elsevier, vol. 14(2), pages 183-190, June.
    6. Kenneth J. Arrow & Anthony C. Fisher, 1974. "Environmental Preservation, Uncertainty, and Irreversibility," Palgrave Macmillan Books, in: Chennat Gopalakrishnan (ed.), Classic Papers in Natural Resource Economics, chapter 4, pages 76-84, Palgrave Macmillan.
    7. Henry, Claude, 1974. "Investment Decisions Under Uncertainty: The "Irreversibility Effect."," American Economic Review, American Economic Association, vol. 64(6), pages 1006-1012, December.
    8. Hanemann, W. Michael, 1989. "Information and the concept of option value," Journal of Environmental Economics and Management, Elsevier, vol. 16(1), pages 23-37, January.
    9. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
    10. Brennan, Michael J & Schwartz, Eduardo S, 1985. "Evaluating Natural Resource Investments," The Journal of Business, University of Chicago Press, vol. 58(2), pages 135-157, April.
    11. Robert McDonald & Daniel Siegel, 1986. "The Value of Waiting to Invest," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(4), pages 707-727.
    12. Mensink, Paul & Requate, Till, 2003. "The Dixit-Pindyck and the Arrow-Fisher-Hanemann-Henry option values are not equivalent," Economics Working Papers 2003-09, Christian-Albrechts-University of Kiel, Department of Economics.
    13. Cox, John C. & Ross, Stephen A. & Rubinstein, Mark, 1979. "Option pricing: A simplified approach," Journal of Financial Economics, Elsevier, vol. 7(3), pages 229-263, September.
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