Investment option under CIR interest rates

  1. Carmona Martínez, Julio
  2. León Valle, Angel
Revista:
Working papers = Documentos de trabajo: Serie AD

Any de publicació: 2007

Número: 24

Tipus: Document de treball

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Resum

We analyze extensively the characteristics of the solution to an irreversibleinvestment decision when the only source of uncertainty comes from interest rates.They are assumed to be driven by the popular Cox-Ingersoll-Ross (CIR) stochasticprocess. Particular attention is paid to the impact that both CIR parameters and riskaversion have on the threshold rate.

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