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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
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
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자료제공 : 네이버학술정보