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Valuation of a hypothetical mining project under commodity price and exchange rate uncertainties by using numerical methods

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  • Aminrostamkolaee, Behnam
  • Scroggs, Jeffrey S.
  • Borghei, Matin Sadat
  • Safdari-Vaighani, Ali
  • Mohammadi, Teymour
  • Hossein Pourkazemi, Mohammad

Abstract

One of the goals presented here is the use of a radial basis function (RBF) method to approximate the numerical values of a gold mining project. RBFs have many attractive features compared to implicit finite differences method (FDM) and explicit FDM. They are mesh-free, computationally more efficient in high dimensions, and very accurate. In other words, the model is more comprehensive, and results are more accurate compared to the previous works. This paper compares accuracy of the RBF method with that of the implicit method (FDM) in this case study. The results indicate that convergence order of the RBF is higher than that of the implicit method. Also, this paper compares the results of the RBF method with those of implicit method for various scenarios.

Suggested Citation

  • Aminrostamkolaee, Behnam & Scroggs, Jeffrey S. & Borghei, Matin Sadat & Safdari-Vaighani, Ali & Mohammadi, Teymour & Hossein Pourkazemi, Mohammad, 2017. "Valuation of a hypothetical mining project under commodity price and exchange rate uncertainties by using numerical methods," Resources Policy, Elsevier, vol. 52(C), pages 296-307.
    • Handle: RePEc:eee:jrpoli:v:52:y:2017:i:c:p:296-307
    DOI: 10.1016/j.resourpol.2017.04.004
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    References listed on IDEAS

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    Cited by:

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    2. Alameer, Zakaria & Elaziz, Mohamed Abd & Ewees, Ahmed A. & Ye, Haiwang & Jianhua, Zhang, 2019. "Forecasting gold price fluctuations using improved multilayer perceptron neural network and whale optimization algorithm," Resources Policy, Elsevier, vol. 61(C), pages 250-260.

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    More about this item

    Keywords

    Discounted cash flow; Real options valuation; Geometric Brownian Motion; Commodity price; Volatility; Implicit FDM and explicit FDM; Radial basis function; Exchange rate;
    All these keywords.

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation
    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics

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