Investing in real options of reduce emissions :by Least-square Monte Carlo approach

• Main Authors: Pei-Ching Lai, 賴佩青
• Other Authors: Hui-Chun Tien
• Format: Others
• Language: zh-TW
• Published: 2009
• Online Access: http://ndltd.ncl.edu.tw/handle/d9f2yz

碩士 === 靜宜大學 === 應用數學研究所 === 97 === Emissions allowance trading scheme is an international greenhouse gas trading system through which we can achieve the goal of emissions reduction set by Kyoto protocol. Emissions trading have brought great impact on investment decisions made by, for example, electricity Power Company and all the other firms which are required to reduce their green house gas emissions under the guidance of Kyoto Protocol. Therefore, to find a better approach to provide accurate and flexible investment evaluation process has become an important issue. Cyriel and Andre(2004) had proposed that under the framework of real options, using binomial tree model for emission allowance price, they obtained an American-style solution for emissions reduction investment. In this study, we use Geometrical Brownian Motion for emission allowance price and use the Least-square Monte Carlo method to solve the American-style real option problem. The advantage of Least-square Monte Carlo method is that it can be used for multi-factor model and therefore it would be a more flexible evaluation approach when we have to include more uncertainty in this real options framework.