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dc.contributor.authorLi, N.
dc.contributor.authorWang, Song
dc.identifier.citationLi, N. and Wang, S. 2019. Pricing options on investment project expansions under commodity price uncertainty. Journal of Industrial and management optimization. 15 (1): pp. 261-273.

In this work we develop PDE-based mathematical models for valuing real options on investment project expansions when the underlying commodity price follows a geometric Brownian motion. The models developed are of a similar form as the Black-Scholes model for pricing conventional European call options. However, unlike the Black-Scholes' model, the payoff conditions of the current models are determined by a PDE system. An upwind finite difference scheme is used for solving the models. Numerical experiments have been performed using two examples of pricing project expansion options in the mining industry to demonstrate that our models are able to produce financially meaningful numerical results for the two non-trivial test problems.

dc.publisherAmerican Institute of Mathematical Sciences
dc.titlePricing options on investment project expansions under commodity price uncertainty
dc.typeJournal Article
dcterms.source.titleJournal of Industrial and management optimization
curtin.departmentSchool of Electrical Engineering, Computing and Mathematical Science (EECMS)
curtin.accessStatusFulltext not available

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