À繫¿¬±¸ Á¦ ±Ç È£ (2009³â 5¿ù)
Asian Review of Financial Research, Vol., No..
pp.876~906
pp.876~906
Investment under Ambiguity and Regime-Switching Environment
U Jin Choi Department of Mathematical Science, KAIST
Kwangmoon Kim Department of Mathematical Science, KAIST
Minsuk Kwak Department of Mathematical Science, KAIST
We consider all or nothing investment problem with a finite time horizon when the investment opportunity set is changing stochastically over time, especially under Markovian regime-switching environment, and a decision maker faces ambiguity of parameters governing prot
ow dynamics of the investment. We apply a-Maxmin Expected Utility(a-MEU) preferences to re
ect the ambiguity seeking attitude of de- cision maker and provide semi-explicit formulas for the expected value of investment and the critical present value of the profit fow. Numerical results show that the crit- ical present value of the profit fow depends on the business cycle and the tendency of ambiguity seeking is mitigated in case of project whose profit fow is dependent on regime-switching environment.
U Jin Choi
Kwangmoon Kim
Minsuk Kwak
We consider all or nothing investment problem with a finite time horizon when the investment opportunity set is changing stochastically over time, especially under Markovian regime-switching environment, and a decision maker faces ambiguity of parameters governing prot
ow dynamics of the investment. We apply a-Maxmin Expected Utility(a-MEU) preferences to re
ect the ambiguity seeking attitude of de- cision maker and provide semi-explicit formulas for the expected value of investment and the critical present value of the profit fow. Numerical results show that the crit- ical present value of the profit fow depends on the business cycle and the tendency of ambiguity seeking is mitigated in case of project whose profit fow is dependent on regime-switching environment.
Investment,Markovian regime-switching,the business cycle,Knightian uncertainty,Ambiguity,-Maxmin Expected Utility
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