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On the debt capacity of growth and decay options

Author

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  • N. LETIFI
  • J.-L. PRIGENT

Abstract

This paper focuses on the impact of debt on the optimal policy for investment and hiring, in the light of the theory of real options. We consider a stochastic demand for the product sold by the company. We examine in particular the investment

Suggested Citation

  • N. Letifi & J.-L. Prigent, 2014. "On the debt capacity of growth and decay options," Working Papers 2014-391, Department of Research, Ipag Business School.
    • Handle: RePEc:ipg:wpaper:2014-391
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    File URL: https://faculty-research.ipag.edu/wp-content/uploads/recherche/WP/IPAG_WP_2014_391.pdf
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    6. Jean-Paul Décamps & Stéphane Villeneuve, 2014. "Rethinking Dynamic Capital Structure Models With Roll-Over Debt," Mathematical Finance, Wiley Blackwell, vol. 24(1), pages 66-96, January.
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    More about this item

    Keywords

    corporate investment; ring and hiring; stochastic demand; barrier options; real options.;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing

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