@techreport{9e05d12586f645499d499b73bcdae3fd,
title = "Investment Decisions with Two-Factor Uncertainty",
abstract = "This paper considers investment problems in real options with non-homogeneous two-factor uncertainty. It shows that, despite claims made in the literature, the method used to derive an analytical solution in one dimensional problems cannot be straightforwardly extended to problems with two stochastic processes. To illustrate, we analyze an investment problem with two stochastic revenue streams and a constant sunk cost. We show that a semi-analytical approach leads to a sub-optimal investment policy. The main message of our paper is that non-homogeneous investment problems can only be solved numerically",
keywords = "investment analysis, optimal stopping time problem, two-factor uncertainty",
author = "T. Compernolle and Kuno Huisman and Kort, {Peter M.} and Maria Lavrutich and Claudia Nunes and J.J.J. Thijssen",
year = "2018",
month = feb,
day = "8",
language = "English",
volume = "2018-003",
series = "CentER Discussion Paper",
publisher = "CentER, Center for Economic Research",
type = "WorkingPaper",
institution = "CentER, Center for Economic Research",
}