Investment option under CIR interest rates

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

Datum der Publikation: 2007

Nummer: 24

Art: Arbeitsdokument

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Zusammenfassung

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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