Publication
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Publication
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We analyze the effect of catastrophic risk on forest investment decisions by employing a forest-level model where the output price is specified to follow a stochastic process. We then incorporate a Poisson jump process to reflect the occurrence of catastrophic events. It is found that the presence of catastrophic risk always results in a reduced production value but an increased investment threshold for a forestry project. However, depending on the assumption regarding the option-whether the right to invest can be maintained after the occurrence of such an event-the degree and pattern of the effect are different.
Fiscal Year: fy98 ·
Problem Area: pa98-1 ·
Source: coop
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Citation:
Yin, Runsheng and David H. Newman. 1996. The effect of catastrophic risk on forest investment decisions. Journal of Environmental Economics and Management 31:186-197.
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Forest Economics and Policy |
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USDA Forest Service Southern Research Station |