Scandinavian Working Papers in Economics
Working Paper Series,
Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance
No 20/17: A framework for modelling cash flow lags
Fredrik Armerin () and Han-Suck Song ()
Additional contact information
Fredrik Armerin: Department of Real Estate and Construction Management, Royal Institute of Technology, Postal: Division of Real Estate Economics and Finance, Royal Institute of Technology, Teknikringen 1OB, 100 44 Stockholm, Sweden
Han-Suck Song: Department of Real Estate and Construction Management, Royal Institute of Technology, Postal: Division of Real Estate Economics and Finance, Royal Institute of Technology, Teknikringen 10B, 100 44 Stockholm, Sweden
Abstract: Many irreversible investment problems studied in finance has the property that the cash flow representing the cost and the revenue of the investment occur at one time (either at the same time, or at two different times). In this note we present a framework in which the cash flows are allowed to be spread out in time, thus yielding a more realistic model. We show the effect of this extension in an investment case study example.
Keywords: Optimal Stopping; Irreversible Investments; Cash Flow Lags; Time-to-build
10 pages, December 28, 2020
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