Publications > Artigos em Revistas Internacionais

High-speed rail transport valuation and conjecture shocks

Couto, G.; Nunes, Cláudia; Pimentel, P.

European Journal of Finance, (2012), 1-15
http://dx.doi.org/10.1080/1351847X.2012.665377

In this paper, we derive the optimal investment policy in a high-speed rail transport (HSR) project. We assume that the source of uncertainty comes from the annual demand, and that it follows a geometric Brownian motion with jumps of random magnitude, occurring in random times, according to a Poisson process. We assess the impact of these shocks on the demand threshold, along with the investment opportunity value and option to differ. We consider several distributions for these jumps, and we compare with the no-jumps case. Numerical results are presented, showing the importance of assumptions about the underlying stochastic process.