Valuing R & D Investments With A Jump-Diffusion Process

Sereno, Luigi (2006) Valuing R & D Investments With A Jump-Diffusion Process. Bologna: Dipartimento di Scienze economiche DSE, p. 13. DOI 10.6092/unibo/amsacta/4718. In: Quaderni - Working Paper DSE (569). ISSN 2282-6483.
Full text available as:
[img]
Preview
Text(pdf)
License: Creative Commons Attribution

Download (195kB) | Preview

Abstract

Traditional tools based on DCF methods fail to capture the value of R&D projects because of their dependence on future events that are uncertain at the time of the initial decision. We consider a continuous-time framework where information arrives both continuously and discontinu-ously. This is modelled by a jump-di¤usion process. This assumption better decribes the evolution of asset value due to the risky nature of many real investments. The main contribution of this paper is to derive a closed-form solution for the multicompound option to value sequential investment opportunities when the underlying asset may reasonably undergo the possibility of jumps in value.

Abstract
Document type
Monograph (Working Paper)
Creators
CreatorsAffiliationORCID
Sereno, Luigi
Keywords
multicompound options; sequential investments; jump- di¤usion process.
Subjects
ISSN
2282-6483
DOI
Deposit date
29 Feb 2016 11:37
Last modified
29 Feb 2016 11:37
URI

Other metadata

Downloads

Downloads

Staff only: View the document

^