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Risk adjusted discounted cash flows in capacity expansion models. (English) Zbl 1274.90426
Summary: This paper addresses a problem that is typical of multi-period capacity expansion equilibrium models: plants or sectors have different risk exposures that may warrant different costs of capital. The paper examines modifications of a capacity expansion model interpreted in equilibrium terms to account for asset-specific costs of capital.

MSC:
90C33 Complementarity and equilibrium problems and variational inequalities (finite dimensions) (aspects of mathematical programming)
91G50 Corporate finance (dividends, real options, etc.)
91G80 Financial applications of other theories
91B26 Auctions, bargaining, bidding and selling, and other market models
Software:
MARKAL; PATH Solver
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References:
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