Threshold-Type Policies for Real Options Using Regime-Switching Models

doi:10.1137/110833300

CORC > 上海财经大学 > 上海财经大学

	Threshold-Type Policies for Real Options Using Regime-Switching Models
	Bensoussan, Alain 1,2,3; Yan, ZhongFeng 4; Yin, G.5
刊名	SIAM JOURNAL ON FINANCIAL MATHEMATICS
	2012
卷号	3 期号:1 页码:667-689
关键词	variational inequality irreversible investment real option regime shift macroeconomic condition optimal stopping problem
ISSN号	1945-497X
DOI	10.1137/110833300
英文摘要	To investigate the impact of macroeconomic conditions on irreversible investments under a regime-switching model, our main effort in this work is to rigorously justify the existence and uniqueness of optimal threshold-type policies. The underlying cash flow process is modeled as a geometric Brownian motion with return rate and volatility depending on a continuous-time Markov chain. The problem is similar to the American style of call options. When dealing either with American options in a financial market or with real options, a common practice in the literature is to postulate threshold-type strategies and to find the optimal threshold levels as solutions of systems of nonlinear algebraic equations. Although from a computational standpoint, this seems to be a reasonable approach, the issue of existence and uniqueness of solutions has never been addressed to date. Instead of assuming the threshold-type policies, this paper establishes that indeed the threshold-type policies are the right choice. Variational inequalities are used to characterize the optimal strategy by an abstract, nonconstructive reasoning. In addition, numerical simulations are also provided to demonstrate quantitative properties and properties of the systems.
WOS研究方向	Business & Economics ; Mathematics ; Mathematical Methods In Social Sciences
语种	英语
出版者	SIAM PUBLICATIONS
WOS记录号	WOS:000318160900025
内容类型	期刊论文
源URL	[http://10.2.47.112/handle/2XS4QKH4/2892]
专题	上海财经大学
通讯作者	Bensoussan, Alain
作者单位	1.Univ Texas Dallas, Int Ctr Decis & Risk Anal, Sch Management, Richardson, TX 75083 USA; 2.Hong Kong Polytech Univ, Grad Sch Business, Hong Kong, Hong Kong, Peoples R China; 3.Ajou Univ, Grad Dept Financial Engn, Suwon 443749, South Korea; 4.Shanghai Univ Finance & Econ, Sch Finance, Shanghai 200433, Peoples R China; 5.Wayne State Univ, Dept Math, Detroit, MI 48202 USA
推荐引用方式 GB/T 7714	Bensoussan, Alain,Yan, ZhongFeng,Yin, G.. Threshold-Type Policies for Real Options Using Regime-Switching Models[J]. SIAM JOURNAL ON FINANCIAL MATHEMATICS,2012,3(1):667-689.
APA	Bensoussan, Alain,Yan, ZhongFeng,&Yin, G..(2012).Threshold-Type Policies for Real Options Using Regime-Switching Models.SIAM JOURNAL ON FINANCIAL MATHEMATICS,3(1),667-689.
MLA	Bensoussan, Alain,et al."Threshold-Type Policies for Real Options Using Regime-Switching Models".SIAM JOURNAL ON FINANCIAL MATHEMATICS 3.1(2012):667-689.