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Table 1 Key value drivers for the option to switch fuel
From: Consumer value of fuel choice flexibility - a case study of the flex-fuel car in Sweden
Financial options | Switching option | Impact on option value |
|---|---|---|
Volatility of stock price | Volatility of future fuel prices | + |
Exercise price | Premium paid for flex-fuel engine | − |
Time to expiration | Window of opportunity for investment (for example, subsidy for purchase) | + |
Risk-free interest rate | Risk adjusted interest rate/risk-free interest rate | (+) |
Dividend | Value lost during option lifespan (for example, changes in taxes and subsidies affecting fuel prices) | – |
Stock price | Expected discounted cost-savings from switching | + |