Real Options In Capital Investment / Edition 1

Real Options In Capital Investment / Edition 1

by Lenos Trigeorgis
     
 

This compilation integrates various new contributions to the growing real options literature. Recent developments in the valuation of capital investment opportunities seen as real options (e.g. to defer, expand, abandon, or switch) have provided the tools and unlocked the possibilities to revolutionize the field of capital budgeting. The resulting insights,

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Overview

This compilation integrates various new contributions to the growing real options literature. Recent developments in the valuation of capital investment opportunities seen as real options (e.g. to defer, expand, abandon, or switch) have provided the tools and unlocked the possibilities to revolutionize the field of capital budgeting. The resulting insights, strategies, and techniques enable quantifying the thus far elusive elements of managerial operating flexibility and strategic interactions. These are vital to successfully capitalize on favorable future investment opportunities or limit losses from adverse market developments. This book presents various models and operating strategies, and a variety of applications ranging from acquisitions and divestitures, to natural resource development and pollution compliance. It is intended for both the academic and the professional market.

The book's contributions are divided into five parts, covering sections on real options and alternative valuation paradigms for capital investment analysis; on the analysis of general exchange or switching options, and interdependencies among multiple such options; on strategic acquisitions, infrastructure, and foreign investment options; on mean reversion/ alternative formulations in natural resource investments, shipping, and start-up ventures; and on other applications in pollution compliance, land development, flexible manufacturing, and financial default options. Both academic and practitioner interest in these developments is unusually high. The book can serve as supplementary material for the academic market, e.g., in advanced finance courses in option pricing or capital budgeting, in doctoral seminars, and as a library resource. It may also be of interest to the professional market (e.g. corporate planners and finance executives in the oil, pharmaceutical, auto and a variety of other industries), academics from related areas (e.g. decision analysts or economists), as well as to international readers (academics, doctoral students, and professionals).

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Product Details

ISBN-13:
9780275946166
Publisher:
ABC-CLIO, Incorporated
Publication date:
09/05/2000
Edition description:
New Edition
Pages:
382
Product dimensions:
6.00(w) x 9.00(h) x 1.00(d)
Lexile:
1580L (what's this?)

Table of Contents

Tables and Figures
Preface
1Real Options: An Overview1
2Methods for Evaluating Capital Investment Decisions under Uncertainty31
3Merging Finance Theory and Decision Analysis47
4The Strategic Capital Budgeting Process: A Review of Theories and Practice69
5The Value of Flexibility: A General Model of Real Options89
6The Valuation of American Exchange Options with Application to Real Options109
7Operating Flexibilities in Capital Budgeting: Substitutability and Complementarity in Real Options121
8The Value of Options in Strategic Acquisitions135
9Corporate Governance, Long-term Investment Orientation, and Real Options in Japan151
10Volatile Exchange Rates and the Multinational Firm: Entry, Exit, and Capacity Options163
11The Effects of Reversion on Commodity Projects of Different Length185
12Contingent Claims Evaluation of Mean-Reverting Cash Flows in Shipping207
13Valuing Start-up Venture Growth Options221
14Investment in Pollution Compliance Options: The Case of Georgia Power243
15Optimal Land Development265
16Multiproduct Manufacturing with Stochastic Input Prices and Output Yield Uncertainty281
17Default Risk in the Contingent Claims Model of Debt303
Bibliography323
Author Index347
Subject Index351
About the Editor and Contributors357

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