Investments with declining cost following a Lévy process

Fredrik Armerin ()
Additional contact information
Fredrik Armerin: Department of Real Estate and Construction Management, Royal Institute of Technology, Postal: Division of Real Estate Economics and Finance, Teknikringen 10B, 100 44 Stockholm, Sweden

No 20/14, Working Paper Series from Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance

Abstract: We consider an optimal investment problem in which the cost of the investment decreases over time. The decrease is modelled using the negative of a non-decreasing Lévy process. The decreasing cost is a way of modelling that innovations drive down the cost of the investment. Several explicit examples of how different Lévy processes influence the value of the investment are given.

Keywords: Optimal stopping; irreversible investments; innovations; Lévy processes (search for similar items in EconPapers)
JEL-codes: G11 G13 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2020-12-21
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.diva-portal.org/smash/record.jsf?pid=diva2:1511911 Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:kthrec:2020_014

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Paper Series from Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance Department of Real Estate and Construction Management, Royal Institute of Technology, Teknikringen 10B, 100 44 Stockholm, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Cecilia Hermansson ().