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Flow options: continuous real caps and floors

Research output: Working paper

Publication date2001
Place of PublicationLancaster University
PublisherThe Department of Accounting and Finance
<mark>Original language</mark>English

Publication series

NameAccounting and Finance Working Paper Series


In this paper we produce formulae to finitely lived options which allow the holder to chose continually between two flows. For this real option that allows frequent and costless switching between two assets, we examine perpetual and then finite values using a risk neutral annuity argument. Applications include energy and commodity consumption costs where switching between flows can occur frequently and costlessly.