01732cas a2200253 a 4500 AALejournalIMF000700 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451937398 1018-5941 BD-DhAAL BD-DhAAL Chan-Lau, Jorge. Fixed Investment and Capital Flows : A Real Options Approach / Jorge Chan-Lau, Peter Clark. Washington, D.C. : International Monetary Fund, 1998. 1 online resource (28 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students This paper draws a link between international capital flows and the real options approach to investment by extending a model of real estate investment. It explains gradual investment, investment booms, and investment during recessions and emphasizes sunk costs, uncertainty, and the value of waiting. The optimal waiting time increases as foreign borrowing becomes more expensive because higher returns are required to cover the sunk costs of investing. The lower the initial level of profitability, the more likely investment will be sequential; conversely, a relatively high initial rate of return will be associated with simultaneous investment. Mode of access: Internet Clark, Peter. IMF Working Papers; Working Paper ; No. 1998/125 Full text available on IMF http://elibrary.imf.org/view/journals/001/1998/125/001.1998.issue-125-en.xml IMF e-Library