Earticle

초록

영어

This paper constructs narrow bounds around the value of real options embedded in capital budgeting decisions by applying the minimax deviations approach to real options in incomplete markets. While it is straightforward to obtain the unique value of a real option with HARA utility functions, the parameters of risk-aversion are often subject to misspecification and raise concerns for practical uses. Recognizing that investors allow deviation from parameter values related to a benchmark pricing kernel, we derive narrow bounds on a real option price. Comparison with the approaches in the literature clarifies advantages of the minimax bounds: simple, consistent, and efficient.

목차

Abstract
 1. Introduction
 2. The Value of a Real Option in Incomplete Markets
  2.1 A Risky Project
  2.2 Equilibrium Values
  2.3 Risk-Adjusted Probabilities
 3. Locating Option Values within the No-Arbitrage Bounds
 4. Tightening the Bounds with the Minimax Deviations Approach
  4.1 No-Arbitrage Bounds
  4.2 Risk-Averse Bounds
  4.3 Minimax Bounds
 5. Comparison with AlternativeMethods
 6. NumericalExample
  6.1 Minimax Bounds
  6.2 Good-Deal Bounds with Sharpe Ratio
  6.3 Pricing Bounds with Gain-Loss Ratio
 7. Conclusion
 References
 A. Real Option Values in a Preference-Based Approach
 B. Risk-Adjusted Probabilities in Incomplete Markets

키워드

저자

• Unyong Pyo [ Faculty of Business Brock University, Canada ]

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간행물

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• 간행물명

  한국재무학회 학술대회

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• 수록기간

  2006~2024

• 십진분류

  KDC 325 DDC 330