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1 décembre 2014
- handle: 10670/1.t9qmbc
info:eu-repo/semantics/openAccess
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Cecilia Maya Ochoa et al., « Real Options Valuation Based on Certainty Equivalents », Ecos de Economía, ID : 10670/1.t9qmbc
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This purpose of this research is to identify appropriate rates to discount the flows from real options in situations in which the risk-free rate does not apply, in particular, in incomplete markets. A methodology is proposed for valuing real options based on certainty equivalence, which requires as a principal condition the consideration of preferences represented with utility functions. A constant relative risk aversion (CRRA) utility function is used to represent these preferences. The results indicate that this methodology adequately reflects how the value of a real option changes in accordance with an investor´s preferences.