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Economic hysteresis effects and hitting time densities for CIR diffusions

Research output: Working paper

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Economic hysteresis effects and hitting time densities for CIR diffusions. / Dias, J C; Shackleton, M B.

Lancaster University : The Department of Accounting and Finance, 2008. (Accounting and Finance Working Paper Series).

Research output: Working paper

Harvard

Dias, JC & Shackleton, MB 2008 'Economic hysteresis effects and hitting time densities for CIR diffusions' Accounting and Finance Working Paper Series, The Department of Accounting and Finance, Lancaster University.

APA

Dias, J. C., & Shackleton, M. B. (2008). Economic hysteresis effects and hitting time densities for CIR diffusions. (Accounting and Finance Working Paper Series). The Department of Accounting and Finance.

Vancouver

Dias JC, Shackleton MB. Economic hysteresis effects and hitting time densities for CIR diffusions. Lancaster University: The Department of Accounting and Finance. 2008. (Accounting and Finance Working Paper Series).

Author

Dias, J C ; Shackleton, M B. / Economic hysteresis effects and hitting time densities for CIR diffusions. Lancaster University : The Department of Accounting and Finance, 2008. (Accounting and Finance Working Paper Series).

Bibtex

@techreport{624da410d19b44a79a67eac944bc87d1,
title = "Economic hysteresis effects and hitting time densities for CIR diffusions",
abstract = "Using the so-called mean-reverting square-root process of Cox et al. (1985b) we generalize the work of Dias and Shackleton (2005) by introducing the mean reversion feature into the economic hysteresis analysis under stochastic interest rates and show that such issue highlights a tendency for a widening effect on the range of inaction, though both thresholds have risen when compared with the no mean-reverting case. In addition, using the work of Linetsky (2004) we compute the hitting time densities in order to have an idea of how long does it take for a current interest rate to revert and hit the investment thresholds that would induce idle firms to invest.",
keywords = "Real options, interest rate uncertainty, perpetuities, investment hysteresis, mean reversion, hitting time densities",
author = "Dias, {J C} and Shackleton, {M B}",
year = "2008",
language = "English",
series = "Accounting and Finance Working Paper Series",
publisher = "The Department of Accounting and Finance",
type = "WorkingPaper",
institution = "The Department of Accounting and Finance",

}

RIS

TY - UNPB

T1 - Economic hysteresis effects and hitting time densities for CIR diffusions

AU - Dias, J C

AU - Shackleton, M B

PY - 2008

Y1 - 2008

N2 - Using the so-called mean-reverting square-root process of Cox et al. (1985b) we generalize the work of Dias and Shackleton (2005) by introducing the mean reversion feature into the economic hysteresis analysis under stochastic interest rates and show that such issue highlights a tendency for a widening effect on the range of inaction, though both thresholds have risen when compared with the no mean-reverting case. In addition, using the work of Linetsky (2004) we compute the hitting time densities in order to have an idea of how long does it take for a current interest rate to revert and hit the investment thresholds that would induce idle firms to invest.

AB - Using the so-called mean-reverting square-root process of Cox et al. (1985b) we generalize the work of Dias and Shackleton (2005) by introducing the mean reversion feature into the economic hysteresis analysis under stochastic interest rates and show that such issue highlights a tendency for a widening effect on the range of inaction, though both thresholds have risen when compared with the no mean-reverting case. In addition, using the work of Linetsky (2004) we compute the hitting time densities in order to have an idea of how long does it take for a current interest rate to revert and hit the investment thresholds that would induce idle firms to invest.

KW - Real options

KW - interest rate uncertainty

KW - perpetuities

KW - investment hysteresis

KW - mean reversion

KW - hitting time densities

M3 - Working paper

T3 - Accounting and Finance Working Paper Series

BT - Economic hysteresis effects and hitting time densities for CIR diffusions

PB - The Department of Accounting and Finance

CY - Lancaster University

ER -