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Corporate Optimal Investment Under Incomplete Information: A Real Option Method

Author(s): Mondher Bellalah | Shujuan Ding | Zhen Wu

Journal: Review of Finance and Banking
ISSN 2067-2713

Volume: 4;
Issue: 1;
Start page: 007;
Date: 2012;
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Keywords: Optimal Investment | Incomplete information | Arbitrage | Real option

This paper develops an option pricing model to value a project with taxes andincomplete information. We derive the value of the option to invest in the project andprovide the threshold value of the project. Some numerical examples are given to show thecharacteristics of the optimal investment rule.

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