Real Options: Capital Investment Appraisal; Estimating the Market Price of Risk and Application to the Valuation of a New Business

Rashid, Muhammad Mustafa (2020): Real Options: Capital Investment Appraisal; Estimating the Market Price of Risk and Application to the Valuation of a New Business.

Abstract

The risk-neutral valuation approach to evaluating an investment avoids the need to estimate risk-adjusted discount rates, but it does require the market price of risk parameters for all stochastic variables. When historical data is available on a particular variable, its market price of risk can be estimated using the capital asset pricing model.

• Item Type: MPRA Paper
• Language: English
• Keywords: Real Options, Capital Investment Appraisal, Market Price of Risk, New Business Valuation, Internet Companies, Amazon
• Subjects: G - Financial Economics > G3 - Corporate Finance and Governance; G - Financial Economics > G3 - Corporate Finance and Governance > G31 - Capital Budgeting ; Fixed Investment and Inventory Studies ; Capacity; G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy ; Financial Risk and Risk Management ; Capital and Ownership Structure ; Value of Firms ; Goodwill; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M1 - Business Administration > M10 - General; N - Economic History > N0 - General; N - Economic History > N8 - Micro-Business History; N - Economic History > N8 - Micro-Business History > N82 - U.S. ; Canada: 1913-

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