Real options with priced regime-switching risk

Autores
Driffill, John; Kenc, Turalay; Sola, Martin
Año de publicación
2013
Idioma
inglés
Tipo de recurso
artículo
Estado
versión publicada
Descripción
We develop a model of regime-switching risk premia as well as regime-dependent factor risk premia to price real options. The model incorporates the observation that the underlying risky income streams of real options are subject to discrete shifts over time as well as random changes. The presence of discrete shifts is due to systematic and unsystematic risk associated with changes in business cycles or in economic policy regimes or events such as takeovers, major changes in business plans. We analyze the impact of regime-switching behavior on the valuation of projects and investment opportunities. We find that accounting for Markov switching risk results in a delay in the expected timing of the investment while the regime-specific factor risk premia make the possibility of a regime shift more pronounced.
Fil: Driffill, John. Birkbeck College; Reino Unido
Fil: Kenc, Turalay. Central Bank of Turkey; Turquía
Fil: Sola, Martin. Consejo Nacional de Investigaciones Científicas y Técnicas; Argentina. Universidad Torcuato Di Tella. Departamento de Economía; Argentina. Birkbeck College; Reino Unido
Materia
REAL OPTIONS
REGIME-DEPENDENT RISK PREMIA
REGIME-SWITCHING RISK PREMIA
Nivel de accesibilidad
acceso abierto
Condiciones de uso
https://creativecommons.org/licenses/by-nc-sa/2.5/ar/
Repositorio
CONICET Digital (CONICET)
Institución
Consejo Nacional de Investigaciones Científicas y Técnicas
OAI Identificador
oai:ri.conicet.gov.ar:11336/85961
Acceder
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network_acronym_str CONICETDig
repository_id_str 3498
network_name_str CONICET Digital (CONICET)
spelling Real options with priced regime-switching riskDriffill, JohnKenc, TuralaySola, MartinREAL OPTIONSREGIME-DEPENDENT RISK PREMIAREGIME-SWITCHING RISK PREMIAhttps://purl.org/becyt/ford/5.2https://purl.org/becyt/ford/5We develop a model of regime-switching risk premia as well as regime-dependent factor risk premia to price real options. The model incorporates the observation that the underlying risky income streams of real options are subject to discrete shifts over time as well as random changes. The presence of discrete shifts is due to systematic and unsystematic risk associated with changes in business cycles or in economic policy regimes or events such as takeovers, major changes in business plans. We analyze the impact of regime-switching behavior on the valuation of projects and investment opportunities. We find that accounting for Markov switching risk results in a delay in the expected timing of the investment while the regime-specific factor risk premia make the possibility of a regime shift more pronounced.Fil: Driffill, John. Birkbeck College; Reino UnidoFil: Kenc, Turalay. Central Bank of Turkey; TurquíaFil: Sola, Martin. Consejo Nacional de Investigaciones Científicas y Técnicas; Argentina. Universidad Torcuato Di Tella. Departamento de Economía; Argentina. Birkbeck College; Reino UnidoWorld Scientific2013-08info:eu-repo/semantics/articleinfo:eu-repo/semantics/publishedVersionhttp://purl.org/coar/resource_type/c_6501info:ar-repo/semantics/articuloapplication/pdfapplication/pdfapplication/pdfhttp://hdl.handle.net/11336/85961Driffill, John; Kenc, Turalay; Sola, Martin; Real options with priced regime-switching risk; World Scientific; International Journal of Theoretical and Applied Finance; 16; 5; 8-2013; 13500281-135002810219-0249CONICET DigitalCONICETenginfo:eu-repo/semantics/altIdentifier/doi/10.1142/S0219024913500283info:eu-repo/semantics/altIdentifier/url/https://www.worldscientific.com/doi/abs/10.1142/S0219024913500283info:eu-repo/semantics/openAccesshttps://creativecommons.org/licenses/by-nc-sa/2.5/ar/reponame:CONICET Digital (CONICET)instname:Consejo Nacional de Investigaciones Científicas y Técnicas2025-09-29T10:28:01Zoai:ri.conicet.gov.ar:11336/85961instacron:CONICETInstitucionalhttp://ri.conicet.gov.ar/Organismo científico-tecnológicoNo correspondehttp://ri.conicet.gov.ar/oai/requestdasensio@conicet.gov.ar; lcarlino@conicet.gov.arArgentinaNo correspondeNo correspondeNo correspondeopendoar:34982025-09-29 10:28:01.37CONICET Digital (CONICET) - Consejo Nacional de Investigaciones Científicas y Técnicasfalse
dc.title.none.fl_str_mv Real options with priced regime-switching risk
title Real options with priced regime-switching risk
spellingShingle Real options with priced regime-switching risk
Driffill, John
REAL OPTIONS
REGIME-DEPENDENT RISK PREMIA
REGIME-SWITCHING RISK PREMIA
title_short Real options with priced regime-switching risk
title_full Real options with priced regime-switching risk
title_fullStr Real options with priced regime-switching risk
title_full_unstemmed Real options with priced regime-switching risk
title_sort Real options with priced regime-switching risk
dc.creator.none.fl_str_mv Driffill, John
Kenc, Turalay
Sola, Martin
author Driffill, John
author_facet Driffill, John
Kenc, Turalay
Sola, Martin
author_role author
author2 Kenc, Turalay
Sola, Martin
author2_role author
author
dc.subject.none.fl_str_mv REAL OPTIONS
REGIME-DEPENDENT RISK PREMIA
REGIME-SWITCHING RISK PREMIA
topic REAL OPTIONS
REGIME-DEPENDENT RISK PREMIA
REGIME-SWITCHING RISK PREMIA
purl_subject.fl_str_mv https://purl.org/becyt/ford/5.2
https://purl.org/becyt/ford/5
dc.description.none.fl_txt_mv We develop a model of regime-switching risk premia as well as regime-dependent factor risk premia to price real options. The model incorporates the observation that the underlying risky income streams of real options are subject to discrete shifts over time as well as random changes. The presence of discrete shifts is due to systematic and unsystematic risk associated with changes in business cycles or in economic policy regimes or events such as takeovers, major changes in business plans. We analyze the impact of regime-switching behavior on the valuation of projects and investment opportunities. We find that accounting for Markov switching risk results in a delay in the expected timing of the investment while the regime-specific factor risk premia make the possibility of a regime shift more pronounced.
Fil: Driffill, John. Birkbeck College; Reino Unido
Fil: Kenc, Turalay. Central Bank of Turkey; Turquía
Fil: Sola, Martin. Consejo Nacional de Investigaciones Científicas y Técnicas; Argentina. Universidad Torcuato Di Tella. Departamento de Economía; Argentina. Birkbeck College; Reino Unido
description We develop a model of regime-switching risk premia as well as regime-dependent factor risk premia to price real options. The model incorporates the observation that the underlying risky income streams of real options are subject to discrete shifts over time as well as random changes. The presence of discrete shifts is due to systematic and unsystematic risk associated with changes in business cycles or in economic policy regimes or events such as takeovers, major changes in business plans. We analyze the impact of regime-switching behavior on the valuation of projects and investment opportunities. We find that accounting for Markov switching risk results in a delay in the expected timing of the investment while the regime-specific factor risk premia make the possibility of a regime shift more pronounced.
publishDate 2013
dc.date.none.fl_str_mv 2013-08
dc.type.none.fl_str_mv info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
http://purl.org/coar/resource_type/c_6501
info:ar-repo/semantics/articulo
format article
status_str publishedVersion
dc.identifier.none.fl_str_mv http://hdl.handle.net/11336/85961
Driffill, John; Kenc, Turalay; Sola, Martin; Real options with priced regime-switching risk; World Scientific; International Journal of Theoretical and Applied Finance; 16; 5; 8-2013; 13500281-13500281
0219-0249
CONICET Digital
CONICET
url http://hdl.handle.net/11336/85961
identifier_str_mv Driffill, John; Kenc, Turalay; Sola, Martin; Real options with priced regime-switching risk; World Scientific; International Journal of Theoretical and Applied Finance; 16; 5; 8-2013; 13500281-13500281
0219-0249
CONICET Digital
CONICET
dc.language.none.fl_str_mv eng
language eng
dc.relation.none.fl_str_mv info:eu-repo/semantics/altIdentifier/doi/10.1142/S0219024913500283
info:eu-repo/semantics/altIdentifier/url/https://www.worldscientific.com/doi/abs/10.1142/S0219024913500283
dc.rights.none.fl_str_mv info:eu-repo/semantics/openAccess
https://creativecommons.org/licenses/by-nc-sa/2.5/ar/
eu_rights_str_mv openAccess
rights_invalid_str_mv https://creativecommons.org/licenses/by-nc-sa/2.5/ar/
dc.format.none.fl_str_mv application/pdf
application/pdf
application/pdf
dc.publisher.none.fl_str_mv World Scientific
publisher.none.fl_str_mv World Scientific
dc.source.none.fl_str_mv reponame:CONICET Digital (CONICET)
instname:Consejo Nacional de Investigaciones Científicas y Técnicas
reponame_str CONICET Digital (CONICET)
collection CONICET Digital (CONICET)
instname_str Consejo Nacional de Investigaciones Científicas y Técnicas
repository.name.fl_str_mv CONICET Digital (CONICET) - Consejo Nacional de Investigaciones Científicas y Técnicas
repository.mail.fl_str_mv dasensio@conicet.gov.ar; lcarlino@conicet.gov.ar
_version_ 1844614283259805696
score 13.070432

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