Change search
CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf
Optimal investment under operational flexibility, risk aversion, and uncertainty
Stockholm University, Faculty of Social Sciences, Department of Computer and Systems Sciences.
2011 (English)In: European Journal of Operational Research, ISSN 0377-2217, E-ISSN 1872-6860, Vol. 213, no 1, 221-237 p.Article in journal (Refereed) Published
Abstract [en]

Traditional real options analysis addresses the problem of investment under uncertainty assuming a risk-neutral decision maker and complete markets. In reality, however, decision makers are often risk averse and markets are incomplete. We confirm that risk aversion lowers the probability of investment and demonstrate how this effect can be mitigated by incorporating operational flexibility in the form of embedded suspension and resumption options. Although such options facilitate investment, we find that the likelihood of investing is still lower compared to the risk-neutral case. Risk aversion also increases the likelihood that the project will be abandoned, although this effect is less pronounced. Finally, we illustrate the impact of risk aversion on the optimal suspension and resumption thresholds and the interaction among risk aversion, volatility, and optimal decision thresholds under complete operational flexibility.

Place, publisher, year, edition, pages
2011. Vol. 213, no 1, 221-237 p.
Keyword [en]
Decision analysis, Investment under uncertainty, Real options, Operational flexibility, Risk aversion
National Category
Social Sciences
Identifiers
URN: urn:nbn:se:su:diva-68294DOI: 10.1016/j.ejor.2011.03.007ISI: 000291082100021OAI: oai:DiVA.org:su-68294DiVA: diva2:477970
Note
authorCount :3Available from: 2012-01-15 Created: 2012-01-03 Last updated: 2017-12-08Bibliographically approved

Open Access in DiVA

No full text

Other links

Publisher's full text

Search in DiVA

By author/editor
Siddiqui, Afzal
By organisation
Department of Computer and Systems Sciences
In the same journal
European Journal of Operational Research
Social Sciences

Search outside of DiVA

GoogleGoogle Scholar

doi
urn-nbn

Altmetric score

doi
urn-nbn
Total: 70 hits
CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf