Professor Kristian Miltersen from Norwegian School of Economics and Business
Administration is giving a VGSF research seminar on "REAL OPTIONS WITH UNCERTAIN
MATURITY AND COMPETITION" on December 7 (Friday, 15:30-17:00), at the Institute for
Advanced Studies (HS II), Stumpergasse 56, 1060 Vienna. The paper to be presented can be
downloaded at the VGSF webpage (Activities & Events--> Research Seminars). The
abstract of the paper is attached below.
Kristian will visit BWZ on Dec 5-7. If you would like to meet him at BWZ, please let me
know as soon as possible.
Kind regards,
Youchang Wu
Abstract. We develop a new approach to dealing with real options problems with uncertain
maturity. This approach is highly applicable to analyze R&D investments and mine or
oil exploration projects. These projects are characterized by signi.cant on-going
investment costs until completion. Since time to completion is uncertain, the total
investment costs will also be uncertain. Despite the fact that these projects include
complicated American abandonment/switching options until completion and European options
at completion (because of .xed .nal investment costs) we obtain simple closed form
solutions. We apply the framework to situations in which the owner of the project has
monopoly rights to the outcome of the project, and to situations in which there are two
owners who simultaneously invest, but where only one of them may obtain the rights to the
outcome. We expand the real options framework to incorporate game theoretic
considerations, including a generalization of mixed strategies to continuous-time models
in the form of abandonment intensities.