INVESTMENT OPTION UNDER CIR INTEREST RATES

Ángel León () and Julio Carmona
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Ángel León: Universidad de Alicante

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: We analyze extensively the characteristics of the solution to an irreversibleinvestment decision when the only source of uncertainty comes from interest rates.They are assumed to be driven by the popular Cox-Ingersoll-Ross (CIR) stochasticprocess. Particular attention is paid to the impact that both CIR parameters and riskaversion have on the threshold rate.

Keywords: CIR process; Project value; Real options; Risk aversion. (search for similar items in EconPapers)
JEL-codes: C61 G31 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2007-10
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Citations: View citations in EconPapers (6)

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http://www.ivie.es/downloads/docs/wpasad/wpasad-2007-24.pdf Fisrt version / Primera version, 2007 (application/pdf)

Related works:
Journal Article: Investment option under CIR interest rates (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasad:2007-24

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