The Valuation of N-Phased Investment Projects under Jump-Diffusion Processes

23 Pages Posted: 30 Apr 2009 Last revised: 21 Jun 2018

See all articles by Rainer Andergassen

Rainer Andergassen

University of Bologna - Department of Economics

luigi sereno

affiliation not provided to SSRN

Date Written: February 26, 2010

Abstract

In this paper we consider N-phased investment opportunities where the time evolution of the project value follows a jump-diffusion process. An explicit valuation formula is derived under two different scenarios: in the first case we consider fixed and certain investment costs and in the second case we consider cost uncertainty and assume that investment costs follow a jump-diffusion process.

Keywords: N-fold compound options, sequential investments, jump-diffusion process

JEL Classification: G12, G13, G30, C60

Suggested Citation

Andergassen, Rainer and sereno, luigi, The Valuation of N-Phased Investment Projects under Jump-Diffusion Processes (February 26, 2010). Available at SSRN: https://ssrn.com/abstract=1397182 or http://dx.doi.org/10.2139/ssrn.1397182

Rainer Andergassen

University of Bologna - Department of Economics ( email )

Strada Maggiore 45
Bologna, 40125
Italy

Luigi Sereno (Contact Author)

affiliation not provided to SSRN

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