Real Options and Threshold Strategies
Mathematical Finance
2015-11-23 v1 Probability
Portfolio Management
Abstract
The paper considers an investment timing problem appearing in real options theory. Present values from an investment project are modeled by general diffusion process. We prove necessary and sufficient conditions under which an optimal investment time is induced by threshold strategy. We study also the conditions of optimality of threshold strategy (over all threshold strategies) and discuss the connection between solutions to investment timing problem and to free-boundary problem.
Keywords
Cite
@article{arxiv.1511.00468,
title = {Real Options and Threshold Strategies},
author = {Vadim Arkin and Alexander Slastnikov},
journal= {arXiv preprint arXiv:1511.00468},
year = {2015}
}
Comments
10 pages