Risk assessment in open-ocean aquaculture: a firm-level investment-production model. Academic Article uri icon

abstract

  • We develop a framework for risk assessment in open-ocean aquaculture. The framework consists of three components: a firm-level investment-production model simulates a specific grow-out project and estimates the project's benefit-cost values, a second model calculates the risk premium far a risk- averse investor, and a third model quantifies the option value for a risk- neutral investor. We show that under uncertainty, the traditional NPV rule for making an investment should be modified. We illustrate our models using a case study of open-ocean aquaculture of Atlantic cod (Gadus morhua) in New England.

publication date

  • January 2005