An arbitrage-free approach to quasi-option value

Article Abstract:

An arbitrage-free model was utilized to obtain quasi-operation value. The model involves employment of approaches from finance to prevent inappropriate matching of a riskless discount rate with a risky project. The model revealed that when the stochastic dynamic process behind a dynamic decision problem is recognized, inappropriate utilization of net present value almost always result to early development. Also, inaccurate evaluation of the stochastic dynamic process may result to incorrect dynamic rule outcome.

Economics, Research and Development in the Social Sciences and Humanities, Analysis, Stochastic processes, Present value analysis

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Why the far-distant future should be discounted at its lowest possible rate

Article Abstract:

In an investment project, the far-distant future may be discounted by using the lowest possible interest rate. Discounting distant-future payoffs of projects or activities has been a problem and economists have been trying to solve it through mechanisms ranging from openly ad-hoc adjustments to formal axiomatic treatments. It is best to use certainty-equivalent social discount rates that decline over time.

Environmental Management

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