Real Options And Investment Under Uncertainty

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Real Options and Investment Under Uncertainty

Author : Eduardo S. Schwartz,Lenos Trigeorgis
Publisher : MIT Press
Page : 890 pages
File Size : 53,8 Mb
Release : 2004
Category : Business & Economics
ISBN : 0262693186

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Real Options and Investment Under Uncertainty by Eduardo S. Schwartz,Lenos Trigeorgis Pdf

The study of investment under uncertainty was stagnant for several decades until developments in real options revitalized the field. The topics covered in this book include the reasons behind the under-investment programme.

Investment under Uncertainty

Author : Robert K. Dixit,Robert S. Pindyck
Publisher : Princeton University Press
Page : 484 pages
File Size : 48,8 Mb
Release : 2012-07-14
Category : Business & Economics
ISBN : 9781400830176

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Investment under Uncertainty by Robert K. Dixit,Robert S. Pindyck Pdf

How should firms decide whether and when to invest in new capital equipment, additions to their workforce, or the development of new products? Why have traditional economic models of investment failed to explain the behavior of investment spending in the United States and other countries? In this book, Avinash Dixit and Robert Pindyck provide the first detailed exposition of a new theoretical approach to the capital investment decisions of firms, stressing the irreversibility of most investment decisions, and the ongoing uncertainty of the economic environment in which these decisions are made. In so doing, they answer important questions about investment decisions and the behavior of investment spending. This new approach to investment recognizes the option value of waiting for better (but never complete) information. It exploits an analogy with the theory of options in financial markets, which permits a much richer dynamic framework than was possible with the traditional theory of investment. The authors present the new theory in a clear and systematic way, and consolidate, synthesize, and extend the various strands of research that have come out of the theory. Their book shows the importance of the theory for understanding investment behavior of firms; develops the implications of this theory for industry dynamics and for government policy concerning investment; and shows how the theory can be applied to specific industries and to a wide variety of business problems.

Real Options

Author : Lenos Trigeorgis
Publisher : MIT Press
Page : 452 pages
File Size : 46,9 Mb
Release : 1996-03-14
Category : Business & Economics
ISBN : 026220102X

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Real Options by Lenos Trigeorgis Pdf

Comprehensive in scope, Real Options reviews current techniques of capital budgeting and details an approach (based on the pricing of options) that provides a means of quantifying the elusive elements of managerial flexibility in the face of unexpected changes in the market. In the 1970s and the 1980s, developments in the valuation of capital-investment opportunities based on options pricing revolutionized capital budgeting. Managerial flexibility to adapt and revise future decisions in order to capitalize on favorable future opportunities or to limit losses has proven vital to long-term corporate success in an uncertain and changing marketplace. In this book Lenos Trigeorgis, who has helped shape the field of real options, brings together a wealth of previously scattered knowledge and research on the new flexibility in corporate resource allocation and in the evaluation of investment alternatives brought about by the shift from static cash-flow approaches to the more dynamic paradigm of real options—an approach that incorporates decisions on whether to defer, expand, contract, abandon, switch use, or otherwise alter a capital investment. Comprehensive in scope, Real Options reviews current techniques of capital budgeting and details an approach (based on the pricing of options) that provides a means of quantifying the elusive elements of managerial flexibility in the face of unexpected changes in the market. Also discussed are the strategic value of new technology, project interdependence, and competitive interaction. The ability to value real options has so dramatically altered the way in which corporate resources are allocated that future textbooks on capital budgeting will bear little resemblance to those of even the recent past. Real Options is a pioneer in this area, coupling a coherent picture of how option theory is used with practical insights in into real-world applications.

Real Options Theory

Author : Jeffrey J. Reuer,Tony W. Tong
Publisher : Emerald Group Publishing
Page : 520 pages
File Size : 49,6 Mb
Release : 2007-07-05
Category : Business & Economics
ISBN : 9781849504942

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Real Options Theory by Jeffrey J. Reuer,Tony W. Tong Pdf

Examines the ways in which real options theory can contribute to strategic management. This volume offers conceptual pieces that trace out pathways for the theory to move forward and presents research on the implications of real options for strategic investment, organization, and firm performance.

Real R & D Options

Author : Dean Paxson
Publisher : Butterworth-Heinemann
Page : 356 pages
File Size : 45,7 Mb
Release : 2003-01-17
Category : Business & Economics
ISBN : 0750653329

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Real R & D Options by Dean Paxson Pdf

This text addresses a wide range of issues in valuation using the Real Options technique. It covers the whole area of Real Options and looks closely at developments, especially in valuing technology companies. Authors in Europe, North and South America, Asia and Africa provide seven Real Options models and applications.

Real Options

Author : Martha Amram,Nalin Kulatilaka
Publisher : Oxford University Press on Demand
Page : 246 pages
File Size : 46,7 Mb
Release : 1999
Category : Business & Economics
ISBN : 0875848451

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Real Options by Martha Amram,Nalin Kulatilaka Pdf

Using real-world examples and clear case studies, the authors provide investors and managers with an innovative method for assessing a company's non-financial assets, allowing them to assess opportunities whose financial rewards are less than certain.

Real Options in Practice

Author : Marion A. Brach
Publisher : John Wiley & Sons
Page : 384 pages
File Size : 48,8 Mb
Release : 2003-04-07
Category : Business & Economics
ISBN : 9780471445562

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Real Options in Practice by Marion A. Brach Pdf

Explores real option theory applied in practice Real options are quickly becoming the valuation and decision-making method of choice for many companies, including oil and gas companies, utilities and natural resource companies, pharmaceutical and biotech companies, Internet companies, and many others. Real Options in Practice allows readers to view the world of real options from the vantage point of a corporate practitioner applying real option valuation techniques on a regular basis. Expert Marion Brach describes the challenges of implementing a real option framework in practice within a corporate setting. Touching on the real options most firms care about, Real Options in Practice identifies the classic types of real options-deferral, abandonment, switching, expansion, and compound-and explores the main concepts critical to understanding real option theory. Through Brach's own three-step real option valuation method readers will learn how the theory of real options is now being applied to drive better, more profitable corporate decision-making. Marion A. Brach, MD, MBA (Hagen, Germany), has undertaken financial valuation of business opportunities and acquisitions using scenario and real option valuation in the biotech industry. A recognized expert on real option theory and practice, Brach received her MBA from the Manchester Business School and frequently speaks at real option seminars.

Mergers & Acquisitions - a Real Option valuation approach of investment decision under uncertainty

Author : Marc Zajicek
Publisher : diplom.de
Page : 74 pages
File Size : 50,8 Mb
Release : 2004-01-06
Category : Business & Economics
ISBN : 9783832475758

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Mergers & Acquisitions - a Real Option valuation approach of investment decision under uncertainty by Marc Zajicek Pdf

Inhaltsangabe:Abstract: The objective of this dissertation is to examine the application of Real Options for the evaluation of companies with regard to acquisitions. There has been an intensive scientific discussion in the past years about the Real Options method for the evaluation of investments and mergers & acquisitions as in practice usually the management tries to capture future developments with static methods of capital budgeting. For example, future cash-flows are discounted with a fixed risk-adjusted discount rate. Therefore, the Real Options approach has been applied very rarely as it has the reputation of high complexity and poor practicability in daily business. However, the use of present values and capitalized values may produce pitfalls in acquisition decisions as strategic investment decisions might be characterized by a wide range of possibilities to react flexibly to a fast changing environment. In chapter 1, the term Mergers & Acquisitions (M&A) is defined and the motives as well as the relevance of M&A transactions for different branches are described in detail. Furthermore, the process and the different phases of a merger or an acquisition are explained. Chapter 2 presents traditional evaluation methods of static net present value, sensitivity analysis, Monte Carlo and decision tree. These classic methods are discussed and a comparison is drawn among these techniques in regard to practicability. At the end of this chapter, a evaluation is presented in regard to specific situations with the mayor parameter of uncertainty and flexibility for the application of these classic methods. The basic concept of option pricing is described in chapter 3. In addition, the Black-Scholes equation and the underlying assumptions are explained in detail in order to understand financial options, which are the basic for the Real Options approach. At the end of the chapter, an example of a call and put option is discussed in order to understand the functioning of options. Chapter 4 presents an introduction and definition of the Real Options method. Furthermore, the value drivers and the value creation due to the application of Real Options are discussed and analyzed in detail. After the discussion of the functioning of Real Options, a comparison of the analogy between financial Options and Real Options is done in order to possible differences. In this context, the limitations of the analogy of financial and Real Options are presented. Finally, [...]

Evaluating real options as a means for investment appraisal under uncertainty and its degree of utilisation by companies

Author : Andreas Würfel
Publisher : diplom.de
Page : 116 pages
File Size : 49,9 Mb
Release : 2003-10-13
Category : Business & Economics
ISBN : 9783832473075

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Evaluating real options as a means for investment appraisal under uncertainty and its degree of utilisation by companies by Andreas Würfel Pdf

Inhaltsangabe:Abstract: This paper evaluates the real options approach (ROA) as a means for appraising capital investments under uncertainty. Globalisation and growing competitiveness have led to an increase in uncertainty with regard to companies decision making. Flexibility to react to this uncertainty has become more important. The question arises whether there is a need for a further investment appraisal technique or whether traditional techniques can cope with that. A growing literature about real options shows that traditional investment appraisal techniques do not value flexibility. That is why ROA has become more important within recent years. However, the degree of its utilisation by companies seems to be rather low. Three possible reasons for that are examined: ROA is not well-known by companies, especially small- and medium-sized enterprises. ROA is only limitedly applicable. ROA is too difficult to use. After traditional investment appraisal techniques have been outlined, the real options approach is illustrated by means of a case study. The possible range of application is assessed by reviewing the literature. A survey was conducted to check whether companies know about or apply that technique, and to identify the tools used by companies. This study shows that while the range of possible applications of real options is rather vast, ROA is rarely known by German and British companies and barely applied. One reason might be, that most books and articles are of rather academic nature. This seems to have been realised since books with a focus on practical application have been published recently. The complexity of ROA seems to be a further reason for its low degree of utilisation. Companies tend to use simpler but more comprehensible techniques although these methods have some major drawbacks. However, business science should not end in itself but serve businesses. Therefore, further emphasis has to be put on making real options approachable for practitioners. Inhaltsverzeichnis:Table of Contents: I.Abstract2 II.Acknowledgements3 III.Table of Contents4 IV.List of Figures7 V.List of Abbreviations8 1.Introduction9 2.Characteristics of Investment Decisions11 2.1What Is a Capital Investment?11 2.2Risk and Uncertainty12 3.Tools for Investment Appraisals15 3.1Static Methods15 3.2Discounted Cash Flow Approaches (Dynamic)17 3.3Approaches Which Try to Deal With Risk20 4.The Real Options Approach24 4.1Why Use Real Options to [...]

Investment Under Uncertainty

Author : Robert K. Dixit
Publisher : Unknown
Page : 483 pages
File Size : 54,5 Mb
Release : 2012
Category : Electronic
ISBN : OCLC:1027203892

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Investment Under Uncertainty by Robert K. Dixit Pdf

How should firms decide whether and when to invest in new capital equipment, additions to their workforce, or the development of new products? Why have traditional economic models of investment failed to explain the behavior of investment spending in the United States and other countries? In this book, Avinash Dixit and Robert Pindyck provide the first detailed exposition of a new theoretical approach to the capital investment decisions of firms, stressing the irreversibility of most investment decisions, and the ongoing uncertainty of the economic environment in which these decisions are mad.

Flexibility and Real Estate Valuation under Uncertainty

Author : David Geltner,Richard de Neufville
Publisher : John Wiley & Sons
Page : 256 pages
File Size : 48,5 Mb
Release : 2018-02-19
Category : Business & Economics
ISBN : 9781119106456

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Flexibility and Real Estate Valuation under Uncertainty by David Geltner,Richard de Neufville Pdf

Provides a revolutionary conceptual framework and practical tools to quantify uncertainty and recognize the value of flexibility in real estate development This book takes a practical "engineering" approach to the valuation of options and flexibility in real estate. It presents simple simulation models built in universal spreadsheet software such as Microsoft Excel®. These realistically reflect the varying and erratic sources of uncertainty and price dynamics that uniquely characterize real estate. The text covers new analytic procedures that are valuable for existing properties and enable a new, more profitable perspective on the planning, design, operation, and evaluation of large-scale, multi-phase development projects. The book thereby aims to significantly improve valuation and investment decision making. Flexibility and Real Estate Valuation under Uncertainty: A Practical Guide for Developers is presented at 3 levels. First, it introduces and explains the concepts underlying the approach at a basic level accessible to non-technical and non-specialized readers. Its introductory and concluding chapters present the important “big picture” implications of the analysis for economics and valuation and for project design and investment decision making. At a second level, the book presents a framework, a roadmap for the prospective analyst. It describes the practical tools in detail, taking care to go through the elements of the approach step-by-step for clarity and easy reference. The third level includes more technical details and specific models. An Appendix discusses the technical details of real estate price dynamics. Associated web pages provide electronic spreadsheet templates for the models used as examples in the book. Some features of the book include: • Concepts and tools that are simple and accessible to a broad audience of practitioners; • An approach relevant for all development projects; • Complementarity with the author's Commercial Real Estate Analysis & Investments—the most-cited real estate investments textbook on the market. Flexibility and Real Estate Valuation under Uncertainty: A Practical Guide for Developers is for everyone studying or concerned with the implementation of large-scale or multi-phase real estate development projects, as well as property investment and valuation more generally.

Strategic Investment

Author : Han T. J. Smit,Lenos Trigeorgis
Publisher : Princeton University Press
Page : 504 pages
File Size : 45,5 Mb
Release : 2012-01-12
Category : Business & Economics
ISBN : 9781400829392

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Strategic Investment by Han T. J. Smit,Lenos Trigeorgis Pdf

Corporate finance and corporate strategy have long been seen as different sides of the same coin. Though both focus on the same broad problem, investment decision-making, the gap between the two sides--and between theory and practice--remains embarrassingly large. This book synthesizes cutting-edge developments in corporate finance and related fields--in particular, real options and game theory--to help bridge this gap. In clear, straightforward exposition and through numerous examples and applications from various industries, Han Smit and Lenos Trigeorgis set forth an extended valuation framework for competitive strategies. The book follows a problem-solving approach that synthesizes ideas from game theory, real options, and strategy. Thinking in terms of options-games can help managers address questions such as: When is it best to invest early to preempt competitive entry, and when to wait? Should a firm compete in R&D or adopt an accommodating stance? How does one value growth options or infrastructure investments? The authors provide a wide range of valuation examples, such as acquisition strategies, R&D investment in high-tech sectors, joint research ventures, product introductions in consumer electronics, infrastructure, and oil exploration investment. Representing a major step beyond standard real options or strategy analysis, and extending the power of real options and strategic thinking in a rigorous fashion, Strategic Investment will be an indispensable guide and resource for corporate managers, MBA students, and academics alike.

Essays on Real Options

Author : Felipe Luis Aguerrevere
Publisher : Unknown
Page : 308 pages
File Size : 52,8 Mb
Release : 2000
Category : Investments
ISBN : UCLA:L0070863840

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Essays on Real Options by Felipe Luis Aguerrevere Pdf

Real Options Analysis

Author : Johnathan Mun
Publisher : John Wiley & Sons
Page : 603 pages
File Size : 53,5 Mb
Release : 2012-07-02
Category : Business & Economics
ISBN : 9781118429075

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Real Options Analysis by Johnathan Mun Pdf

"Mun demystifies real options analysis and delivers a powerful, pragmatic guide for decision-makers and practitioners alike. Finally, there is a book that equips professionals to easily recognize, value, and seize real options in the world around them." --Jim Schreckengast, Senior VP, R&D Strategy, Gemplus International SA, France Completely revised and updated to meet the challenges of today's dynamic business environment, Real Options Analysis, Second Edition offers you a fresh look at evaluating capital investment strategies by taking the strategic decision-making process into consideration. This comprehensive guide provides both a qualitative and quantitative description of real options; the methods used in solving real options; why and when they are used; and the applicability of these methods in decision making.

Irreversibility, Uncertainty, and Investment

Author : Robert S. Pindyck
Publisher : World Bank Publications
Page : 58 pages
File Size : 43,7 Mb
Release : 1989
Category : Capital investments
ISBN : 8210379456XXX

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Irreversibility, Uncertainty, and Investment by Robert S. Pindyck Pdf

Irreversible investment is especially sensitive to such risk factors as volatile exchange rates and uncertainty about tariff structures and future cash flows. If the goal of macroeconomic policy is to stimulate investment, stability and credibility may be more important than tax incentives or interest rates.