SCIENCE@home

Stochastic-dynamic modelling of farm-level investments under uncertainty

Alisa Spiegel,W. Britz,U. Djanibekov,R. Finger

Published 2020 in Environmental Modelling & Software

ABSTRACT

Abstract In the light of uncertainties, high initial costs, and temporal managerial flexibility, the real options approach has gained interest as a valuation tool for different types of natural resources management problems. Yet, neither real options valuation method excels under consideration of variability of resource endowments, returns-to-scale and predefined sizes of options. We fill the methodological gap by developing a method based on Monte Carlo simulation, scenario tree reduction, and stochastic programming that is advantageous for valuing real options where timing, scale and interactions among constraints and alternatives matter. The method advances in straightforward conversion of deterministic programming applications based on the classical net present value approach into a real options framework, and in introducing complexity into existing real options models. We illustrate the method with a case study featuring investment options regarding the adoption, coppicing, and conversion of perennial biomass energy production systems.

PUBLICATION RECORD

  • Publication year

    2020

  • Venue

    Environmental Modelling & Software

  • Publication date

    2020-05-01

  • Fields of study

    Agricultural and Food Sciences, Computer Science, Economics

  • Identifiers
    DOI 10.1016/j.envsoft.2020.104656
  • External record

    Open on Semantic Scholar

  • Source metadata

    Semantic Scholar

CITATION MAP

EXTRACTION MAP

CLAIMS

  • No claims are published for this paper.

CONCEPTS

  • No concepts are published for this paper.

REFERENCES

Showing 1-85 of 85 references · Page 1 of 1

CITED BY

Showing 1-17 of 17 citing papers · Page 1 of 1