Bitte verwenden Sie diesen Link, um diese Publikation zu zitieren, oder auf sie als Internetquelle zu verweisen: https://hdl.handle.net/10419/63879 
Erscheinungsjahr: 
2003
Schriftenreihe/Nr.: 
ETLA Discussion Papers No. 841
Verlag: 
The Research Institute of the Finnish Economy (ETLA), Helsinki
Zusammenfassung: 
The current extensive literature on irreversible investment decisions usually makes the assumption of constant interest rate. In this paper we study the impact of interest rate and revenue variability on the decision to carry out an irreversible investment project. Given the generality of the considered valuation problem, we first provide a thorough mathematical characterization of the two-dimensional optimal stopping problem and develop some new results. We establish that interest rate variability has a profound decelerating or accelerating impact on investment demand depending on whether the current interest rate is below or above the long run steady state interest rate and that its quantitative size may be very large. Moreover, allowing for interest rate uncertainty is shown to decelerate rational investment demand by raising both the required exercise premium of the irreversible investment opportunity and the value of waiting. Finally, we demonstrate that increased revenue volatility strengthens the negative impact of interest rate uncertainty and vice versa.
Schlagwörter: 
Irreversible investment
variable interest rates
free boundary problems
JEL: 
Q23
G31
C61
Dokumentart: 
Working Paper

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