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Finance / Accounting -
Real Options

This site started as a compilation of links on Real Options as a methodology for business valuation. It soon turned out that the Real Options approach is of use for more than that. It it is also a helpful decision tool for other corporate decisions on strategic capital investments such as investments or R&D Projects.
Hence you will find here information on:
- the Real Options methodology in itself
- the application of Real Options for business valuation
- other applications of the Real Options concept.

More topics on Business Valuation:
Knowledgebase - Finance - Business Valuation

 

 
 

Directory
A Practical Approach to Real Options Valuation in System Design This paper addresses the low penetration of real options concepts and theory, particularly in engineering. pdf-file  
A Quick Primer on Risk and Decision Analysis for Everyone:  Applying Monte Carlo Simulation, Real Options, Forecasting, and Portfolio Optimization.  
Approach The notion that investments should be valued in the same way as financial options has been around for a while. But only now is it beginning to appeal to a wider corporate audience.  
Brief Introduction    
Influence Diagrams for Real Options Valuation This paper proposes the use of Influence Diagrams (ID) as effective tools to model and place values on investment opportunities consisting of options on real assets (real options).   
Modeling Investment Risks and Uncertainties with Real Options Approach Real Option Analysis (ROA) offers a nuanced approach to strategic investment that quantitatively takes into account investment risks and the value of the open options for budget decision-makers.  2007  
Options Pricing of Dynamic Strategies Managers responsible for capital investment decision making need valuation models that can navigate both corporate finance and competitive strategy to generate well-grounded prices. Real options provide the firm with flexibility to adapt to changes in its environment.   
Practitioner's Guide An Excerpt from Real Options: A Practitioner's Guide   
Real Options Reality Bits Pundits have been heralding real option analysis as the valuation tool of the future for several years now, but few firms are using it. Mike Hanley finds out why and talks to two firms that are succeeding where others have failed.   
Real Options: The Value Added through Optimal Decision Making How management can use techniques from the field of decision analysis to more accurately estimate the value of assets that have flexible options.   
Simulation and Optimization for Real Options Valuation This paper introduces a simulation-optimization approach to valuing real investment options based on a model containing several decision variables and realistic stochastic inputs.  
Thinking in Real (Options) Time How companies are maximizing the power of real options thinking without getting bogged down in complexity.  
Using Real Options in Security Analysis This report introduces real options as a key addition to the valuation toolbox. It gives a definition, sets real options in relation to strategic planning, provides case studies and offers information on the maths behind the model. TOP
What is Technology Worth?  A Real Options Case Study The authors of Oliver Wyman's Private Equity Practice (in joined effort with Technical University Berlin) developed a framework to quantify the value of a company's managerial flexibility, modeled according to the "real options" approach. 2007   

 

 

Literature

Real Options, Revised Edition: A Practitioner's Guide
by Tom Copeland, Vladimir Antikarov
This book provides expert guidance on how to implement the theory to maximize investment opportunities by utilizing uncertainty as an asset and reducing downside risk.
more about this book

Real Options: Managing Strategic Investment in an Uncertain World
by Martha Amram, Nalin Kulatilaka
Huge payoffs in business usually entail embracing lots of risk. That's the message of Real Options, by Martha Amram and Nalin Kulatilaka. The authors argue that standard models of evaluating strategic investments fail to consider the element of risk fully. The book provides plenty of theoretical case studies, formulas, and charts that demonstrate how to shape business strategies using a system based on option-pricing. The method can value everything from undeveloped land to untried products.
more about this book

Real Options Analysis: Tools and Techniques for Valuing Strategic Investment and Decisions
by Johnathan Mun
This book 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.
more about this book

Project Valuation Using Real Options: A Practitioner's Guide
by Prasad Kodukula, Chandra Papudesu
Traditional project valuation tools such as discounted cash flow/net present value assume a "fixed" path ahead. But real world projects face uncertainties, forcing you to change the path often. This book introduces a more practical approach to project valuation known as real options analysis. Derived from options theory in modern finance, this approach is based on the Nobel Prize-winning work of three MIT economists.
more about this book

Strategic Investment: Real Options and Games
by Han T. J. Smit, Lenos Trigeorgis
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? ... 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.
more about this book

 

 

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Status: 03. Juli 2015