Exchange Rate and Expropriation Risk in Multinational Capital Budgeting: A Stochastic Calculus Approach

International Journal of Business Studies, Vol. 3, No. 2

Posted: 23 May 2001

See all articles by Vincent J. Hooper

Vincent J. Hooper

SP Jain School of Global Management

John Pointon

University of Plymouth

Multiple version iconThere are 2 versions of this paper

Abstract

This paper models political risk in international capital budgeting by utilising stochastic calculus. We assume that expropriation events are Poisson distributed across time and that the exchange rate follows a geometric Brownian motion process. The solution to our model is closed form. Examples are given of its practical implementation.

Note: This is a description of the paper and not the actual abstract.

Keywords: Stochastic Calculus, Geometric Brownian Motion, Poisson, Multinational Capital Budgeting

JEL Classification: F33, G31

Suggested Citation

Hooper, Vincent James and Pointon, John, Exchange Rate and Expropriation Risk in Multinational Capital Budgeting: A Stochastic Calculus Approach. International Journal of Business Studies, Vol. 3, No. 2, Available at SSRN: https://ssrn.com/abstract=268587

Vincent James Hooper (Contact Author)

SP Jain School of Global Management ( email )

John Pointon

University of Plymouth ( email )

Mast House
Plymouth, Devon PL4 8AA
United Kingdom
+44-1752-232826 (Phone)
+44-1752-232853 (Fax)

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