Real options analysis pdf

nReal options have two unique characteristics - Some or all of the underlying asset(s) are not traded (priced) - Underlying assets might, or might not have correlation with other traded assets nReal Options Analysis (ROA) generally used for strategic decision making, traditional option analysis most used in trading What is a real option? "A real option is the right, but not the obligation, to acquire, expand, contract, abandon or switch some or all of an economic asset on fixed terms on or before the time the opportunity ceases to be available." What is a real option? (cont) •Physical and strategic economic assets and opportunities of firm Real options theory is a major new framework in the theory of investment decision-making. It modifies NPV (Net Present Value) theory of investment decisions. NPV theory says that an investment project's future cash flows are estimated, and if there is doubt regarding those cash flows, the expected value is determined. 1 REAL OPTION ANALYSIS (ROA) Armanto Witjaksono 1 ABSTRACT Net Present Value (NPV) method have populer since middle 70 s and now most 19 downloads 110 Views 56KB Size. Report. DOWNLOAD PDF. Recommend Documents. OPTIMALISASI WAKTU INVESTASI DENGAN FUZZY REAL OPTION . OPTIMALISASI WAKTU INVESTASI DENGAN FUZZY REAL OPTION . Chapter 13 OPTION Making Real Options Really Work. by. Alexander B. van Putten. and. Ian MacMillan. From the Magazine (December 2004) Summary. As a way to value growth opportunities, real options have had a I. OVERVIEW OF OPTION PRICING FOR FINANCIAL SECURITIES Options give an investor the right, but not the obligation, to buy or sell a security according to predetermined terms during some period or at some specific point. Stock option contracts can be divided into two categories: calls and puts. A call option gives the holder the right to purchase Real options valuation, also often termed real options analysis, [1] ( ROV or ROA) applies option valuation techniques to capital budgeting decisions. [2] A real option itself, is the right—but not the obligation—to undertake certain business initiatives, such as deferring, abandoning, expanding, staging, or contracting a capital investment In the real options literature, a "standard" real options game3 (ROG) model can be described as a model where the value of the investment is treated as a state variable that follows a known process4; time is considered infinite and continuous; the investment cost is sunk, indivisible and fixed5; firms Real Options Analysis and the Assumptions of the NPV Rule1 Tom Arnold Assistant Professor of Finance E.J. Ourso College of Business Administration 2163 CEBA Louisiana State University Baton Rouge, LA 70803 O: 225-578-6369 F: 225-578-6366 tmarnol@lsu.edu Richard L. Shockley, Jr. Assistant Professor of Finance Ford Motor Company Teaching Fellow theoretical presentations of real options available in the market. Johnathan Mun 2003 Real options analysis course: business cases and software applications This publication was a logical continuation of "Real Option Analysis" described above. It characterized the possibilities of applying real options in decision planning and the ways of Real Options Analysis versus Traditional DCF Valuation in Layman ' s Terms Dr @inproceedings{Mun2006RealOA, title={Real Options Analysis versus Traditional DCF Valuation in Layman ' s Terms Dr}, author={. Johnathan Mun}, year={2006} }.. J. Mun; Published 2006 Real Options Analysis (3rd Edition) Modeling Risk (3rd Edition) Advanced Ana