Title :

Valuing an investment project using no-arbitrage and the alpha-maxmin criteria: From Knightian uncertainty to risk

Author(s) :

Braouezec, Yann [Auteur]
Lille économie management - UMR 9221 [LEM]
Joliet, Robert [Auteur]
Lille économie management - UMR 9221 [LEM]

Journal title :

Economics Letters

Pages :

111-115

Publisher :

Elsevier

Publication date :

2019-05

ISSN :

0165-1765

English keyword(s) :

Knightian uncertainty
Investment decision
Option to wait
No-arbitrage
α -maxmin

HAL domain(s) :

Sciences de l'Homme et Société/Economies et finances

English abstract : [en]

We consider a two-period irreversible investment decision problem in which the firm can either invest in period 0 or in period 1. The firm is assumed to be able to specify a set of three scenarios or more but not a probability ...
Show more >We consider a two-period irreversible investment decision problem in which the firm can either invest in period 0 or in period 1. The firm is assumed to be able to specify a set of three scenarios or more but not a probability measure. Assuming the option to wait is valued with the no-arbitrage principle, when the firm makes use of the criteria α-maxmin, we show the firm ends up with a known probability measure that assigns a positive probability to three or four scenarios only.Show less >

Language :

Anglais

Popular science :

Non

Collections :

• Lille Économie Management (LEM) - UMR 9221

Source :

Harvested from HAL