Irreversible Investment, Incremental Capital Accumulation, and Price Uncertainty

We consider optimal incremental capital accumulation in the presence of investment irreversibility and general price uncertainty. We present a set of general conditions under which the optimal capital accumulation path can be explicitly characterized in terms of an ordinary threshold rule stating that investment is optimal whenever the underlying price exceeds a capital-dependent threshold. We also present a set of general conditions under which increased price volatility expands the region where investment is suboptimal and decreases both the expected cumulative present value of the marginal revenue product of capital and the value of the future expansion options.Price uncertainty, irreversible investment, incremental capital accumulation.

Irreversible investment under interest rate variability: new results

The current literature on irreversible investment decisions usually makes the assumption of a constant interest rate. We study the impact of interest rate and revenue variability on the decision to carry out an irreversible investment project. Given the generality of the valuation problem considered, we first provide a thorough mathematical characterization of the two-dimensional optimal stopping problem and develop some new results. We establish that interest rate variability has a profound decelerating or accelerating impact on investment demand depending on whether the current interest rate is below or above the long run steady state interest rate, and that its quantitative size may be very large. Allowing for interest rate uncertainty is shown to decelerate rational investment demand by raising both the required exercise premium of the irreversible investment opportunity and the value of waiting. Finally, we demonstrate that increased revenue volatility strengthens the negative impact of interest rate uncertainty and vice versa.irreversible investment; variable interest rates; free boundary problems

Irreversible investment under interest rate variability: new results

The current literature on irreversible investment decisions usually makes the assumption of a constant interest rate. We study the impact of interest rate and revenue variability on the decision to carry out an irreversible investment project. Given the generality of the valuation problem considered, we first provide a thorough mathematical characterization of the two-dimensional optimal stopping problem and develop some new results. We establish that interest rate variability has a profound decelerating or accelerating impact on investment demand depending on whether the current interest rate is below or above the long run steady state interest rate, and that its quantitative size may be very large. Allowing for interest rate uncertainty is shown to decelerate rational investment demand by raising both the required exercise premium of the irreversible investment opportunity and the value of waiting. Finally, we demonstrate that increased revenue volatility strengthens the negative impact of interest rate uncertainty and vice versa.irreversible investment, variable interest rates, free boundary problems

Do Standard Real Option Models Overestimate the Required Rate of Return of Real Estate Investment Opportunities?

We consider how the inter-temporal discreteness of the revenue and cost processes affect the optimal timing of a real estate investment opportunity in comparison with the investment timing strategy obtained by relying on the traditional continuous real option model. We characterize both optimal investment rules explicitly and show that the continuous model may lead to a significantly higher required rate of return than the discrete model. Hence, our results show that the use of continuous time models leads to smaller and suboptimal amount of investment. Our numerical illustrations also indicate that this difference grows as volatility increases. Consequently, even though higher volatility decelerates investment in the discrete case as well, it decelerates it less than the continuous model would predict.Real options, real estate investment timing, exchange option

The exposure of the hybrid detector of the Pierre Auger Observatory

The Pierre Auger Observatory is a detector for ultra-high energy cosmic rays. It consists of a surface array to measure secondary particles at ground level and a fluorescence detector to measure the development of air showers in the atmosphere above the array. The "hybrid" detection mode combines the information from the two subsystems. We describe the determination of the hybrid exposure for events observed by the fluorescence telescopes in coincidence with at least one water-Cherenkov detector of the surface array. A detailed knowledge of the time dependence of the detection operations is crucial for an accurate evaluation of the exposure. We discuss the relevance of monitoring data collected during operations, such as the status of the fluorescence detector, background light and atmospheric conditions, that are used in both simulation and reconstruction.Comment: Paper accepted by Astroparticle Physic

Update on the correlation of the highest energy cosmic rays with nearby extragalactic matter

Data collected by the Pierre Auger Observatory through 31 August 2007 showed evidence for anisotropy in the arrival directions of cosmic rays above the Greisen-Zatsepin-Kuz'min energy threshold, \nobreak{$6\times 10^{19}$eV}. The anisotropy was measured by the fraction of arrival directions that are less than $3.1^\circ$ from the position of an active galactic nucleus within 75 Mpc (using the V\'eron-Cetty and V\'eron $12^{\rm th}$ catalog). An updated measurement of this fraction is reported here using the arrival directions of cosmic rays recorded above the same energy threshold through 31 December 2009. The number of arrival directions has increased from 27 to 69, allowing a more precise measurement. The correlating fraction is $(38^{+7}_{-6})$, compared with $21$ expected for isotropic cosmic rays. This is down from the early estimate of $(69^{+11}_{-13})$. The enlarged set of arrival directions is examined also in relation to other populations of nearby extragalactic objects: galaxies in the 2 Microns All Sky Survey and active galactic nuclei detected in hard X-rays by the Swift Burst Alert Telescope. A celestial region around the position of the radiogalaxy Cen A has the largest excess of arrival directions relative to isotropic expectations. The 2-point autocorrelation function is shown for the enlarged set of arrival directions and compared to the isotropic expectation.Comment: Accepted for publication in Astroparticle Physics on 31 August 201

Atmospheric effects on extensive air showers observed with the Surface Detector of the Pierre Auger Observatory

Atmospheric parameters, such as pressure (P), temperature (T) and density, affect the development of extensive air showers initiated by energetic cosmic rays. We have studied the impact of atmospheric variations on extensive air showers by means of the surface detector of the Pierre Auger Observatory. The rate of events shows a ~10% seasonal modulation and ~2% diurnal one. We find that the observed behaviour is explained by a model including the effects associated with the variations of pressure and density. The former affects the longitudinal development of air showers while the latter influences the Moliere radius and hence the lateral distribution of the shower particles. The model is validated with full simulations of extensive air showers using atmospheric profiles measured at the site of the Pierre Auger Observatory.Comment: 24 pages, 9 figures, accepted for publication in Astroparticle Physic

The Fluorescence Detector of the Pierre Auger Observatory

The Pierre Auger Observatory is a hybrid detector for ultra-high energy cosmic rays. It combines a surface array to measure secondary particles at ground level together with a fluorescence detector to measure the development of air showers in the atmosphere above the array. The fluorescence detector comprises 24 large telescopes specialized for measuring the nitrogen fluorescence caused by charged particles of cosmic ray air showers. In this paper we describe the components of the fluorescence detector including its optical system, the design of the camera, the electronics, and the systems for relative and absolute calibration. We also discuss the operation and the monitoring of the detector. Finally, we evaluate the detector performance and precision of shower reconstructions.Comment: 53 pages. Submitted to Nuclear Instruments and Methods in Physics Research Section

Advanced functionality for radio analysis in the Offline software framework of the Pierre Auger Observatory

The advent of the Auger Engineering Radio Array (AERA) necessitates the development of a powerful framework for the analysis of radio measurements of cosmic ray air showers. As AERA performs "radio-hybrid" measurements of air shower radio emission in coincidence with the surface particle detectors and fluorescence telescopes of the Pierre Auger Observatory, the radio analysis functionality had to be incorporated in the existing hybrid analysis solutions for fluoresence and surface detector data. This goal has been achieved in a natural way by extending the existing Auger Offline software framework with radio functionality. In this article, we lay out the design, highlights and features of the radio extension implemented in the Auger Offline framework. Its functionality has achieved a high degree of sophistication and offers advanced features such as vectorial reconstruction of the electric field, advanced signal processing algorithms, a transparent and efficient handling of FFTs, a very detailed simulation of detector effects, and the read-in of multiple data formats including data from various radio simulation codes. The source code of this radio functionality can be made available to interested parties on request.Comment: accepted for publication in NIM A, 13 pages, minor corrections to author list and references in v

Search for First Harmonic Modulation in the Right Ascension Distribution of Cosmic Rays Detected at the Pierre Auger Observatory

We present the results of searches for dipolar-type anisotropies in different energy ranges above $2.5\times 10^{17}$ eV with the surface detector array of the Pierre Auger Observatory, reporting on both the phase and the amplitude measurements of the first harmonic modulation in the right-ascension distribution. Upper limits on the amplitudes are obtained, which provide the most stringent bounds at present, being below 2% at 99% $C.L.$ for EeV energies. We also compare our results to those of previous experiments as well as with some theoretical expectations.Comment: 28 pages, 11 figure