Files
Abstract
gie study a land developer's decision to invest in a wetlands mitigation bank. The
state at which it is optimal to "cash in" the investment in return for restoration credits
increases with uncertainty. We calibrate and numerically solve a stochastic control model
which describes the developer's investment problem. We study the effect of the parameters
of the model on the investment trajectory and the optimal stopping state. A subsidy increases
the option value of the investment and the stopping state. A small decrease in the variance of
the state dynamics decreases the optit 'ialue of investment and the stopping state.