Real Options and Investment under Uncertainty: Classical Readings and Recent Contributions

Real Options and Investment under Uncertainty: Classical Readings and Recent Contributions

by Eduardo S. Schwartz
     
 

ISBN-10: 0262693186

ISBN-13: 9780262693189

Pub. Date: 09/01/2004

Publisher: MIT Press

The study of investment under uncertainty was stagnant for several decades, until recent developments in real options provided the tools to revitalize the field. The techniques and insights derived from option pricing can now be used to quantify the elusive elements of managerial operating flexibility and strategic interactions ignored or underestimated by

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Overview

The study of investment under uncertainty was stagnant for several decades, until recent developments in real options provided the tools to revitalize the field. The techniques and insights derived from option pricing can now be used to quantify the elusive elements of managerial operating flexibility and strategic interactions ignored or underestimated by conventional Net Present Value and other quantitative approaches.Topics covered include the reasons for the under-investment problem and conceptual frameworks for viewing productive investment opportunities as real options; useful valuation building blocks; the quantifying of various types of real options separately and in combination; strategic aspects of investment under uncertainty; numerical analysis techniques; a variety of applications, including the valuing of natural resources, R&D and pioneer ventures, land development,
strategic acquisitions, government subsidies, power plants and pollution options,
flexible manufacturing, and multinational operations; and empirical evidence from oil leasing, land prices, and discontinued operations.

The MIT Press

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Product Details

ISBN-13:
9780262693189
Publisher:
MIT Press
Publication date:
09/01/2004
Edition description:
New Edition
Pages:
881
Product dimensions:
7.00(w) x 9.00(h) x 1.50(d)
Age Range:
18 Years

Table of Contents

1Real options and investment under uncertainty : an overview1
IUnderinvestment and conceptual options approaches17
2Finance theory and financial strategy19
3Today's options for tomorrow's growth33
4Valuing managerial flexibility47
5The options approach to capital investment61
6A conceptual options framework for capital budgeting79
IIReview of some basic models101
7Real options : an overview103
8A new approach to evaluating natural resource investments135
9Investment and hysteresis153
10The general flexibility to switch : real options revisited179
11Irreversibility, uncertainty, and investment199
IIIValuing various real options251
12The value of waiting to invest253
13Time to build, option value, and investment decisions273
14Abandonment value and project life295
15Irreversible investment, capacity choice, and the value of the firm313
16Evaluating natural resource investments335
17The nature of option interactions and the valuation of investments with multiple real options359
IVStrategy and competition383
18Strategy as a portfolio of real options385
19The value of options in strategic acquisitions405
20Capital budgeting for interrelated projects : a real options approach419
21Flexibility and commitment in strategic investment451
22Strategic growth options499
23Investment in technological innovations : an option pricing approach517
VNumerical techniques537
24A log-transformed binomial numerical analysis method for valuing complex multi-option investments539
25Finite difference methods and jump processes arising in the pricing of contingent claims : a synthesis559
26Valuation by approximation : a comparison of alternative option valuation techniques571
27Simulation and numerical methods in real options valuation601
VIApplications621
28Applications of option-pricing theory : twenty-five years later623
29Scientific management at Merck : an interview with CFO Judy Lewent633
30Case studies on real options641
31The value of flexibility : the case of a dual-fuel industrial steam boiler663
32A real options application in natural-resource investments679
33Managing investment opportunities under price uncertainty : from "last chance" to "wait and see" strategies689
34Urban land prices under uncertainty719
35Investments of uncertain cost : an application to the construction of nuclear power plants733
36Operating flexibility, global manufacturing, and the option value of a multinational network743
VIIEmpirical evidence771
37Option valuation of claims on real assets : the case of offshore petroleum leases773
38Empirical testing of real option-pricing models803
39Investor valuation of the abandonment option823

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