Real options
Auteurs : HOWELL Dr Sydney, STARK Professor Andrew, NEWTON Dr David, PAXSON Professor D
Real option analysis is increasingly being applied to many aspects of executive decision making about which there is uncertainty. Not only is it important for capital investment decisions, but it has implications for corporate strategy and company valuation too. Real option analysis is fast becoming an essential, if complex, technique for all finance executives to grasp.
This briefing seeks to demystify real options by explaining the essential concepts in accessible terms with worked practical examples to illustrate key points. It provides you with a thorough understanding of the concepts behind real options and a guide to carrying out a real option analysis, so that you can make informed decisions as to where and when to invest. You will also gain confidence in delegating to internal specialists or external consultants.
Contents include:
- Introducing real options
- Real options and investment appraisal techniques
- Essential concepts
- How to use real options
- Worked practical examples
- Limitations and pitfalls
- The future of real options analysis
Preface
Introduction to real options analysis
- What sorts of business decision can be changed by real options analysis?
- How does real options analysis differ from traditional analysis methods?
- Just what is a real option?
- Some fundamental option terms
- More complex types of real options
- How do real options compare with financial options?
- How can real options analysis affect business decisions?
- Some examples of how real options analysis can lead to unexpected decisions
- What drives the valuation of a real option?
- How can we calculate the value of a real option?
- The structure of this book and how to use it
- Summary of the key ideas in this chapter
Essential option concepts
- Introduction
- The basic language of financial options and real options
- The price and the value of a financial or a real option, and the main variables that drive value
- The decision on when to exercise an option an American call option on a dividend-paying stock
- A summary of the story so far
Applying financial option concepts to real options
- Introduction
- A typical case of a compound option
- A summary of some real option techniques, as they are conventionally named in the literature
- Case studies of real options
- Real options in managing a football club - Dean Paxson
- Real options impacts on the valuation of an electric power generation plant - Mustafa Cavus
- An option with two random walk factors - David Newton
- DixPin Biotech plc a simplified example of a two-state (binary or binomial) option - Andrew Stark
- Options to activate and inactivate resources
The pitfalls of real options analysis and how to avoid them
- Introduction
- Using real options when we shouldn t
- Using the wrong real options model
- Getting the model right, but inserting wrong values which bias the answer
- Getting the model and the data right, but making mistakes in the solution
The future of real options analysis
Summary
- Why is real options analysis so powerful?
- Why is real options analysis so important?
- What kinds of business will find real options analysis most and least useful?
- How can we best use real options thinking?
Appendices
- Essentials of discounted cash flow
- Essentials of the capital asset pricing model
- Technical appendix
- A note on the finite difference method for numerical solution of option values - David Newton
Glossary
Date de parution : 11-2000
Ouvrage de 160 p.
