TITLE:
Real Options Adoption with Poisson Price, Quantity, and Policy Uncertainty Jumps
AUTHORS:
Chong (Andrea) Zhao, Gregory Colson, Hazel Wetzstein, Michael Wetzstein
KEYWORDS:
Asset Replacement, Brownian Motion, Investment, Poisson Jumps
JOURNAL NAME:
Theoretical Economics Letters,
Vol.13 No.6,
December
22,
2023
ABSTRACT: A unifying methodology is presented, which jointly considers correlated
Brownian motion processes with Poisson jumps in both revenue and policy. The
methodology is unique in considering price and quantity as geometric Brownian
motion processes with jumps following a Poisson process in revenue from market
shocks and policy uncertainty.