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Capital Investments and Real Options: New Proposals

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  • Beatriz Mota Aragón

    (Universidad Autónoma Metropolitana)

Abstract

The main contribution of this research is in the area of Real Option Theory, based on the Net Present Value (NPV) as a stochastic process. A model to value real options is suggested from constructing a continuous model for net present value named “Vasicek extended”. In this context, the Cox-Ingersoll-Ross (1985) model for interest rate is examined. In the model, external control variables (Zt) change the net cash flows. The modified NPV(Zt) gives a more accurate valuation of VPN(Zt,)+f, where f is a real option

Suggested Citation

  • Beatriz Mota Aragón, 2011. "Capital Investments and Real Options: New Proposals," Revista de Administración, Finanzas y Economía (Journal of Management, Finance and Economics), Tecnológico de Monterrey, Campus Ciudad de México, vol. 5(1), pages 65-76.
    • Handle: RePEc:ega:rafega:201105
    as

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    File URL: http://alejandria.ccm.itesm.mx/egap/documentos/2011V5A5Mota.pdf
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    References listed on IDEAS

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