Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/159410
Authors: 
Sereno, Luigi
Year of Publication: 
2006
Series/Report no.: 
Quaderni - Working Paper DSE 569
Abstract: 
Traditional tools based on DCF methods fail to capture the value of R&D projects because of their dependence on future events that are uncertain at the time of the initial decision. We consider a continuous-time framework where information arrives both continuously and discontinu-ously. This is modelled by a jump-di¤usion process. This assumption better decribes the evolution of asset value due to the risky nature of many real investments. The main contribution of this paper is to derive a closed-form solution for the multicompound option to value sequential investment opportunities when the underlying asset may reasonably undergo the possibility of jumps in value.
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by/3.0/
Document Type: 
Working Paper

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