Schöne Real Options Valuation

The Importance of Stochastic Process Choice in Commodity Price Modelling
1. Auflage 2014
ISBN: 978-3-658-07493-7
Verlag: Springer
Format: PDF
Kopierschutz: 1 - PDF Watermark

E-Book, Englisch, 114 Seiten

Reihe: BestMasters

The Author shows that modelling the uncertain cash flow dynamics of an investment project deserves careful attention in real options valuation. Focusing on the case of commodity price uncertainty, a broad empirical study reveals that, contrary to common assumptions, prices are often non-stationary and exhibit non-normally distributed returns. Subsequently, more realistic stochastic volatility, jump diffusion, and Lévy processes are evaluated in the context of a stylised investment project. The valuation results suggest that stochastic process choice can have substantial implications for valuation results and optimal investment rules.

Max Schöne is a Ph.D. student at the WHU - Otto Beisheim School of Management with a research focus on real options valuation and decision making under uncertainty.

Autoren/Hrsg.

Schöne, Max

Inhaltsverzeichnis

1;Foreword;6
2;Table of contents;7
3;List of figures;9
4;List of tables;10
5;List of abbreviations;11
6;1 Introduction;13
6.1;1.1 Problem and objective;14
6.2;1.2 Course of investigation;16
7;2 Data;18
8;3 Empirical analysis;21
8.1;3.1 Stationarity of prices;21
8.2;3.2 Analysis of returns;34
8.2.1;3.2.1 Stylised properties;35
8.2.2;3.2.2 Jumps and GARCH effects;44
9;4 Modelling commodity prices;52
9.1;4.1 Stochastic processes;53
9.1.1;4.1.1 Stochastic volatility;57
9.1.2;4.1.2 Jump diffusion;59
9.1.3;4.1.3 Lévy processes;63
9.2;4.2 Model selection;69
9.2.1;4.2.1 Calibration;69
9.2.2;4.2.2 Goodness of fit;74
10;5 Capital budgeting implications;79
10.1;5.1 A stylised investment project;79
10.2;5.2 Results;84
11;6 Conclusion;88
12;Appendix;90
12.1;Appendix A;90
12.1.1;A1: Liquidity of commodity prices. A1:;90
12.1.2;A2: Historical price evolution. A1:;91
12.1.3;A3: Non-trading dates excluded from dataset (1);92
12.1.4;A3: Non-trading dates excluded from dataset (2);93
12.1.5;A4: In-sample APDF: Calibrated parameters (1);94
12.1.6;A4: In-sample APDF: Calibrated parameters (2);95
12.1.7;A5: Out-of-sample APDF: Calibrated parameters (1);96
12.1.8;A5: Out-of-sample APDF: Calibrated parameters (2);97
12.1.9;A6: Capital investment project: Valuation parameters;98
12.2;Appendix B;99
12.2.1;B1: Expected value and variance for GBM and the Vasicek model:;99
12.2.2;B2: Maximum likelihood calibration:;99
12.2.3;B3: Characteristic function and Fourier transforms;101
12.2.4;B4: Quadratic exponential scheme for Heston and Bates process;102
12.2.5;B5: Basis functions and confidence intervals in LSM;105
13;References;107