Abstract
Abstract. The risk-neutral valuation approach to evaluating an investment avoids the need to estimate risk-adjusted discount rates, but it does require the market price of risk parameters for all stochastic variables. When historical data is available on a particular variable, its market price of risk can be estimated using the capital asset pricing model.
Keywords. Real options; Capital investment appraisal; Market price of risk; New business valuation; Internet companies; Amazon.
JEL. G30; G31; G32; N00; N80; M10.References
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