Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/194625 
Year of Publication: 
2014
Citation: 
[Journal:] Cogent Economics & Finance [ISSN:] 2332-2039 [Volume:] 2 [Issue:] 1 [Publisher:] Taylor & Francis [Place:] Abingdon [Year:] 2014 [Pages:] 1-13
Publisher: 
Taylor & Francis, Abingdon
Abstract: 
The Least-Squares Monte Carlo model (LSM model) has emerged as the derivative valuation technique with the greatest impact in current practice. As with other options valuation models, the LSM algorithm was initially posited in the field of financial derivatives and its extension to the realm of real options requires considering certain questions which might hinder understanding of the algorithm and which the present paper seeks to address. The implementation of the LSM model combines Monte Carlo simulation, dynamic programming and statistical regression in a flexible procedure suitable for application to valuing nearly all types of corporate investments. The goal of this paper is to show how the LSM algorithm is applied in the context of a corporate investment, thus contributing to the understanding of the principles of its operation.
Subjects: 
capital budgetingnvestment policy
general
general economics and teaching
corporate finance and governance
JEL: 
G31
G0
A
G3
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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