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Article
Irreversibility and interest rates
International Journal of Business and Economics, (2006)
  • Giuseppe Travaglini
Abstract

The literature on irreversible investment fails in exploring the relationship between the present value of alternative strategies and the appropriate risk-adjusted interest rates. We will attempt to fill this gap showing that to avoid arbitrage opportunities the real option's rate must be higher than the rate of the immediate strategy. Further, we explain how irreversibility influences the risk-return combination of competing strategies acting as a pure factor of risk.

Disciplines
Publication Date
2006
Citation Information
Giuseppe Travaglini. "Irreversibility and interest rates" International Journal of Business and Economics, Vol. 5 Iss. 2 (2006)
Available at: http://works.bepress.com/giuseppe_travaglini/5/