Decision making under uncertainty - an option valuation approach to power planning (English)

This paper addresses the problem of irreversibility of investments, a topic related to the recently evolving "real options" literature. In the presence of alternatives, the opportunity to invest in a large "irreversible" project with uncertain benefits and costs is similar to a financial "call" option. In exercising this option one forgoes the potential gains from postponing the investment decision. Conventional economic appraisal techniques ignore...

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Author

Crousillat,Enrique O.;

Martzoukos, Spiros;

Industry and Energy Department;
Document Date
1991/08/31
Document Type
Departmental Working Paper
Report Number
11330
Volume No
1
Total Volume(s)
1
Disclosure Date
2010/07/01
Doc Name
Decision making under uncertainty - an option valuation approach to power planning
Keywords
discount rate

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Citation

Crousillat,Enrique O.; Martzoukos, Spiros; Industry and Energy Department.

Decision making under uncertainty - an option valuation approach to power planning (English). Industry and Energy Department working paper. Energy Series paper ; no. 39 Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/284621468764740876

Decision making under uncertainty - an option valuation approach to power planning (English)

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