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ARE REAL OPTIONS "REAL"? ISOLATING UNCERTAINTY FROM RISK IN REAL OPTIONS ANALYSIS [PDF]
Annals of Financial Economics, 2014 This paper derives an adjusted Black–Scholes pricing formula. In separating risk and uncertainty using the robust control technique, we find that both uncertainty and risk raise management's subjective evaluation of real options. We suggest a simple method to filter the risk of the project and to acquire a more reliable value of real options without ...
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SSRN Electronic Journal, 2017
zbMATH Open Web Interface contents unavailable due to conflicting licenses.
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Afforestation as a real option: Choosing among options
2003The theory of real options has received a considerable interest in recent years. At the core of the literature has been a so-called single-option model, i.e. a model where the decision-maker must decide the timing of a real investment given stochastic returns of the single asset in question and where the investment is a sunk cost.
Thorsen, Bo Jellesmark +1 more
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Real Options and Optionalities in Shipping
2009In Chapters 7 and 8, we discussed options on shipping freight rates, hedging with freight options, as well as their pricing and trading strategies. In this chapter we explore the natural extension of these instruments for valuing flexibility and optionality in investment and operational projects using ‘real option analysis’ (ROA).
Amir H. Alizadeh, Nikos K. Nomikos
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Review of Financial Economics, 2004
Cash Flow from operations can be controlled using real options. In this normative paper, we quantify (Trigeorgis, 1996) page 123 intuition about the risk hedging properties of real options with respect to downside risk. This result is reached modeling the whole distribution in expanded NPV using an Euler scheme Monte Carlo method, computing forward the
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Cash Flow from operations can be controlled using real options. In this normative paper, we quantify (Trigeorgis, 1996) page 123 intuition about the risk hedging properties of real options with respect to downside risk. This result is reached modeling the whole distribution in expanded NPV using an Euler scheme Monte Carlo method, computing forward the
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Real Options and Real Tradeoffs
Academy of Management Review, 2004The commentaries on our article fail to come to grips with the distinct challenges raised by a process of experimentation that leads to the discovery of new possible initiatives. These challenges differ from those posed by an investment that provides privileged access to a prespecified set of possible follow-on investments. By treating these challenges
Ron Adner, Daniel A. Levinthal
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Real options and real strategies
Strategic Change, 2007Abstract The formulation of strategic plans within the real options framework promotes flexibility and provides an answer to critics of conventional strategic planning who argue that the deterministic and inflexible nature of that process might leave managers ill‐prepared to cope with uncertainty.
Stefanos Zarkos +2 more
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Real Options for Real Ventures
2004Black-Scholes is useful for valuing real options, but not in the way often used for new ventures. The use rests on an apparent analogy between real and stock options. Although conceptually helpful, a direct analogy is flawed for most real ventures. The most critical flaw is the assumption that the variance in new venture outcomes is a continuous time ...
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