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Stochastic discount factors and the optimal timing of irreversible investments

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

No 19/11, Working Paper Series from Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance

Abstract: By using a general semimartingale framework, we show how the transformation of an optimal stopping problem under the objective probability measure into an optimal stopping problem under the risk-neutral probability measure looks like. We also note that the difference between equivalent and a locally equivalent are important when considering infinite time horizons (i.e., when considering perpetual options).

Keywords: optimal stopping; stochastic discount factors; irreversible investments (search for similar items in EconPapers)
JEL-codes: G11 G13 (search for similar items in EconPapers)
Pages: 10 pages
Date: 2019-12-20
New Economics Papers: this item is included in nep-mic and nep-ore
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