Abstract
ABSTRACTI outline and discuss economic insights afforded by the elegant and powerful continuous‐time techniques that economists discovered some 20 years ago. I do so in the context of a simple action‐timing problem that does not exploit those techniques, in order to illustrate how the role of uncertainty in shaping the optimality of adoption depends on substantive modeling details. I then outline the clearer implications popular and tractable continuous‐time continuous processes, noting that they may fail to represent key features of some real‐life business investment problems, but provide a suitable toolkit for treatment not only of financial phenomena but also of real option problems, such as those encountered in dynamic consumption problems, where small and unpredictable random changes are realistic.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
