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176. Management of adverse events: risk mitigation or exiting?
Invited abstract in session TA-57: Robust decisions in finance and investments, stream Modern Decision Making in Finance and Insurance.
Tuesday, 8:30-10:00Room: S06 (building: 101)
Authors (first author is the speaker)
| 1. | Carlos Oliveira
|
| Department of Industrial Economics and Technology Management, Norwegian University of Science and Technology | |
| 2. | Rita Pimentel
|
| Industrial Economics and Technology Management, NTNU |
Abstract
In this presentation, we consider a firm that may face sudden decreases in its revenue. Its revenue is modeled by a geometric Brownian motion, and the cumulative effect of negative shocks is modeled by a compound Poisson process. The firm has two options: either to exit the market or to adopt risk mitigation measures to reduce the impact of the revenue decrease. The firm's option value is modeled as an optimal stopping problem, which we analyze in this presentation. Furthermore, we examine the impact of protective strategies on the firm's option value.
Keywords
- Stochastic Models
- Decision Theory
- Financial Modelling
Status: accepted
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