Real Options with a Double Continuation Region
نویسندگان
چکیده
If the average risk-adjusted growth rate of the projects present value V overcomes the discount rate but is dominated by the average risk-adjusted growth rate of the cost I of entering the project, a non-standard double continuation region can arise: The rm waits to invest in the project if V is insu¢ ciently above I as well as if V is comfortably above I. Under a framework with di¤usive uncertainty, we give exact characterization to the value of the option to invest, to the structure of the double continuation region, and to the subset of the primitivesvalues that support such a region.
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