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dc.contributor.authorAdkins, Roger*
dc.contributor.authorPaxson, D.*
dc.contributor.authorPereira, P.J.*
dc.contributor.authorRodrigues, A.*
dc.date.accessioned2019-06-05T11:01:19Z
dc.date.available2019-06-05T11:01:19Z
dc.date.issued2019-06
dc.identifier.citationAdkins R, Paxson D, Pereira PJ et al (2019) Investment decisions with finite-lived collars. Journal of Economic Dynamics and Control. 103: 185-204.en_US
dc.identifier.urihttp://hdl.handle.net/10454/17109
dc.descriptionYesen_US
dc.description.abstractThe duration of most collar arrangements provided by governments to encourage early investment in infrastructure, renewable energy facilities, or other projects with social objectives are finite, not perpetual. We extend the previous literature on collar-style arrangements by providing an analytical solution for the idle and active values, as well as the investment triggers, for projects where collars are either finite-lived or retractable. What is the difference between these types of arrangements with their perpetual counterpart? Lots, including different vega signs, and substantially different values for different current price levels. Often, finite and retractable collars justify earlier investment timing than perpetual collars. In general, we demonstrate that the finite-lived and retractable versions have a significant impact on optimal behavior, relative to the perpetual case. An important consideration when negotiating the floors, ceilings, and duration (or signalling the expected duration) of a finite or a retractable collar is the current price level of the output and its expected volatility over the life of the contract.en_US
dc.description.sponsorshipCarried out within the funding with COMPETE reference n. POCI-01-0145-FEDER-006683 (Artur Rodrigues) and POCI-01-0145-FEDER-006890 (Paulo J. Pereira), FCT/MEC’s (Fundação para a Ciência e a Tecnologia, I.P.) financial support through national funding and by ERDF through the Operational Programme on Competitiveness and Internationalization - COMPETE 2020 under the PT2020 Partnership Agreement.en_US
dc.language.isoenen_US
dc.relation.isreferencedbyhttps://doi.org/10.1016/j.jedc.2019.04.008en_US
dc.rights© 2019 Elsevier B.V. All rights reserved. Reproduced in accordance with the publisher's self-archiving policy. This manuscript version is made available under the CC-BY-NC-ND 4.0 license.en_US
dc.subjectFinite collarsen_US
dc.subjectPerpetual collarsen_US
dc.subjectRetractable collarsen_US
dc.subjectInvestment opportunitiesen_US
dc.titleInvestment decisions with finite-lived collarsen_US
dc.status.refereedYesen_US
dc.date.Accepted2019-04-28
dc.date.application2019-05-02
dc.typeArticleen_US
dc.date.EndofEmbargo2021-05-03
dc.type.versionAccepted manuscripten_US
dc.description.publicnotesThe full-text of this article will be released for public view at the end of the publisher embargo on 03 May 2021.en_US
refterms.dateFOA2019-06-05T11:01:19Z


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