Devaluating projects and the investment–uncertainty relationship

The investment strategies for a dynamic supply chain under stochastic demands

“…4, the option value is positively correlated with both the drift term and the volatility. Therefore, only at the lower level of volatility, the results confirm the conclusion of Oscar Gutierrez (2007) that uncertaintyinvestment relationship can be positive even when the investment threshold increases with uncertainty. From the perspective of investment timing, a firm could spend more time waiting for the optimal entry time when the threshold increases with the volatility at a lower level and the growth rate.…”

Investment timing, asymmetric information, and audit structure: A real options framework

“…28 The impact of uncertainty on investments has been of interest to economists for a long time. See Sarkar (2000Sarkar ( , 2003, Gutierrez (2007), Wong (2007), and Gryglewicz et al (2008). 29 See Dixit and Pindyck (1994, Chapter 5) for the proof.…”

Optimal R&D investment for a risk-averse entrepreneur

“…28 For price uncertainty, these results assume an infinite project life and constant convenience yield or opportunity cost of foregone cashflows, d. In the complete market or risk-neutral setting, Gryglewicz et al (2008) show that if instead the project life is finite and d increases with uncertainty then the investment threshold can decrease with increased uncertainty if the project life is sufficiently small and if the price uncertainty is also low. Note also that the positive relationship between price uncertainty and investment thresholds in complete markets does not automatically imply either that investment will be delayed (Sarkar, 2000;Wong, 2007;Gutierrez, 2007), or that the value of project flexibility always increases with uncertainty (Kort et al, 2010). 29 Under price uncertainty the effect of risk aversion is also scaled by a measure of the project's size, generally the investment cost.…”