Valuation and Information Acquisition Policy for Claims Written on Noisy Real Assets ∗

@inproceedings{Childs1999ValuationAI,
  title={Valuation and Information Acquisition Policy for Claims Written on Noisy Real Assets ∗},
  author={Paul D. Childs and Carol Martin Gatton},
  year={1999}
}
This paper studies the effects of noise on contingent-claim values, option exercise policies and the incentives to acquire information to improve irreversible exercise decisions. We determine distributional parameters for the conditional expected asset value in which the noise and the underlying asset value dynamics follow normal, lognormal and mean-reverting processes. Option prices are found to depend on the revealed variance of asset price, suggesting that only information that can be acted… CONTINUE READING

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