Staged venture capital investment considering unexpected major events
Summary: This paper presents a dynamic model of capital financing, taking into consideration unexpected major events occurring within continuous time model. We are considering a special jump-diffusion model first described by \textit{P. A. Samuelson} [SIAM Rev. 15, 1--42 (1973; Zbl 0261.90009)] while using traditional geometric Brownian motion. This paper seeks to accurately show the innovative project valuation when unexpected major events occur and get the analytical results of the project option value. Furthermore, we analyzed the impact of multi-staged financing; results indicated that both sources of uncertainty positively impact the project option value; particularly, the option price when considering unexpected major events occurrence is larger than the option price without unexpected major events. Based on a comparative-static analysis, new propositions for optimal amount of investment and optimal level of project are derived from simulations.
- Venture capital, staged financing and optimal funding policies under uncertainty
- Optimizing venture capital investments in a jump diffusion model
- Valuation of N-stage investments under jump-diffusion processes
- Optimal Sequential Investment Decision-Making with Jump Risk
- Investment timing and capacity choice in duopolistic competition under a jump-diffusion model
- Dynamic contracting under imperfect public information and asymmetric beliefs
- Evaluating pharmaceutical R\&D under technical and economic uncertainty
- Mathematics of Speculative Price
- Option pricing when underlying stock returns are discontinuous
- Venture capital, staged financing and optimal funding policies under uncertainty
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