An option valuation analysis of investment choices by a regulated firm
Management Science
Pricing of financial derivatives via simulation
WSC '95 Proceedings of the 27th conference on Winter simulation
Numerical valuation of high dimensional multivariate European securities
Management Science
New advances and applications of combining simulation and optimization
WSC '96 Proceedings of the 28th conference on Winter simulation
Path-dependent options: extending the Monte Carlo simulation approach
Management Science
Options pricing: using simulation for option pricing
Proceedings of the 32nd conference on Winter simulation
Real options analysis of the timing of IS investment decisions
Information and Management
Managing capacity for telecommunications networks under uncertainty
IEEE/ACM Transactions on Networking (TON)
Options in the Real World: Lessons Learned in Evaluating Oil and Gas Investments
Operations Research
Real Options Analysis and Strategic Decision Making
Organization Science
Short-Term Generation Asset Valuation: A Real Options Approach
Operations Research
Financial derivatives and real options: effect of implementation time on real options valuation
Proceedings of the 34th conference on Winter simulation: exploring new frontiers
Proceedings of the 35th conference on Winter simulation: driving innovation
Approximating free exercise boundaries for American-style options using simulation and optimization
WSC '04 Proceedings of the 36th conference on Winter simulation
Financial Modeling with Crystal Ball and Excel + CD (Wiley Finance)
Financial Modeling with Crystal Ball and Excel + CD (Wiley Finance)
Using Binomial Decision Trees to Solve Real-Option Valuation Problems
Decision Analysis
Adaptability infrastructure for bridging IT security evaluation and options theory
Proceedings of the 2nd international conference on Security of information and networks
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Managerial flexibility has value. The ability of their managers to make smart decisions in the face of volatile market and technological conditions is essential for firms in any competitive industry. This advanced tutorial describes the use of Monte Carlo simulation and stochastic optimization for the valuation of real options that arise from the abilities of managers to influence the cash flows of the projects under their control. Option pricing theory supplements discounted cash flow methods of valuation by considering managerial flexibility. Managers' options to take actions that affect real investment projects are comparable to options on the sale or purchase of financial assets. Just as a financial option derives much of its value from the potential price movements of the underlying financial asset, a real option derives much of its value from the potential fluctuations of the cash flows generating the value of the investment project.