The Value of Waiting to Invest Export

@article{citeulike:2364109, abstract = {This paper studies the optimal timing of investment in an irreversible project where the benefits from the project and the investment cost follow continuous- time stochastic processes. The optimal investment rule and an explicit formula for the value of the option to invest are derived, assuming that the option is valued by risk-averse investors who are well diversified. The same analysis is applied to the scrapping decision. Simulations show that this option value can be significant, and that for reasonable parameter values it is optimal to wait until benefits are twice the investment costs.}, author = {Mcdonald, Robert and Siegel, Daniel}, citeulike-article-id = {2364109}, citeulike-linkout-0 = {http://www.jstor.org/stable/1884175}, journal = {The Quarterly Journal of Economics}, keywords = {options, real}, number = {4}, pages = {707--728}, posted-at = {2008-02-11 23:10:58}, priority = {2}, title = {The Value of Waiting to Invest}, url = {http://www.jstor.org/stable/1884175}, volume = {101}, year = {1986} }

TY - JOUR ID - citeulike:2364109 L3 - citeulike-article-id:2364109 N2 - This paper studies the optimal timing of investment in an irreversible project where the benefits from the project and the investment cost follow continuous- time stochastic processes. The optimal investment rule and an explicit formula for the value of the option to invest are derived, assuming that the option is valued by risk-averse investors who are well diversified. The same analysis is applied to the scrapping decision. Simulations show that this option value can be significant, and that for reasonable parameter values it is optimal to wait until benefits are twice the investment costs. IS - 4 JF - The Quarterly Journal of Economics EP - 728 TI - The Value of Waiting to Invest VL - 101 SP - 707 KW - options KW - real AU - Mcdonald, Robert AU - Siegel, Daniel PY - 1986/// UR - http://www.jstor.org/stable/1884175 ER -