The Impact of Stochastic Extraction Cost on the Value of an Exhaustible Resource : The Case of the Alberta Oil Sands

@inproceedings{Almansour2011TheIO,
  title={The Impact of Stochastic Extraction Cost on the Value of an Exhaustible Resource : The Case of the Alberta Oil Sands},
  author={Abdullah Almansour and Margaret Insley},
  year={2011}
}
In a much cited paper, Brennan and Schwartz (1985) demonstrated the application of contingent claims analysis to the valuation of a nonrenewable natural resources project when the decision-maker has flexibility to choose from several modes of operations open, closed and abandoned. The authors assumed fixed extraction costs and that the price of the resource follows Geometric Brownian Motion. The resulting stochastic optimal control problem must be solved numerically, such as with a finite… CONTINUE READING
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