@techreport{Alvarez2004Does,
abstract = {We use a Wicksellian single rotation framework to analyze the impact of the intertemporally
fluctuating and stochastic mean-reverting interest rate process on the optimal harvesting
threshold and thereby the expected length of the rotation period, when forest value is also
stochastic following geometric Brownian motion and landowners are risk-averse. We provide
an explicit solution for the two-dimensional path-dependent rotation problem and demonstrate
that higher interest rate volatility increases, while higher risk aversion decreases the optimal
harvesting threshold. Moreover, under risk aversion increased forest value volatility decreases
the optimal harvesting threshold, while it has no effect under risk neutrality. Numerical
illustrations indicate that higher interest rate volatility will raise the expected rotation period
at an increasing rate, while higher forest value volatility will decrease its sensitivity under risk
aversion.},
author = {Luis H. R. Alvarez and Erkki Koskela},
copyright = {http://www.econstor.eu/dspace/Nutzungsbedingungen},
keywords = {Q23; G31; C61; 330; forest rotation; risk aversion; stochastic interest rates; optimal stopping; Forst\"{o}konomie; Abholzung; Suchtheorie; Risikoaversion; Zins; Stochastischer Prozess; Theorie},
language = {eng},
number = {1285},
title = {Does risk aversion accelerate optimal forest rotation under uncertainty?},
type = {CESifo working papers},
url = {http://hdl.handle.net/10419/18923},
year = {2004}
}