AØKA08064U  Investment Theory - cancelled 2014

Volume 2013/2014
Education
MSc in Economics
Content
Investment projects typically consist of an initial investment and some uncertain dividend. An example could be to build a factory and sell the produce at an uncertain market price. In the course investment projects are seen as flexible in the sense that investor is able to decide when to invest rather than facing the choice between investing now or not investing. Moreover there may be other flexibilities in investment projects such as the possibilities to stop the project and to expand the project. Due to the flexibility the usual NPV rule (if the net present value is positive, then invest) turns out to be wrong. Indeed it is necessary to take the flexibility into account. In the course a theory, where the options or flexibilities in investment projects are priced, is developed. All necessary theory is introduced In the course.
Learning Outcome
After the course the student should:
  • Understand the principles of investment theory based on real options. 
  • Have a basic knowledge of random processes in continuous time, including Ito’s lemma. 
  • Master the techniques for evaluating investment projects based on real options. 
  • Be able to apply the theory to new investment projects with new real options. 
  • Understand the steps in applying (investment) theory to real life projects.
Syllabus: A.K. Dixit og R.S. Pindyck: Investment under Uncertainty, Princeton University press + notes + articles.
Basic knowledge of economics and probability theory.
6 hours of combined lectures and exercises every working day from the 22nd July to the 7th August.
Credit
7,5 ECTS
Type of assessment
Written examination, 3 hours under invigilation
The exam is a 3-hours written examination with closed books.
Aid
Without aids
Marking scale
7-point grading scale
Censorship form
External censorship
100 % censurship
Exam period
Will be updated before the start of the semester
Re-exam
Same as ordinary. But if only a few students have registered for the re-exam, the exam might change to an oral exams with a synopsis to be handed in. This means that the examination date also will change.
Criteria for exam assesment
The Student must in a satisfactory way demonstrate that he/she has mastered the learning outcome of the course.
  • Category
  • Hours
  • Lectures
  • 78
  • Preparation
  • 125
  • Exam
  • 3
  • Total
  • 206