Valuing risky projects: option pricing theory and decision analysis
Management Science
Options in the Real World: Lessons Learned in Evaluating Oil and Gas Investments
Operations Research
Short-Term Variations and Long-Term Dynamics in Commodity Prices
Management Science
Anniversary Article: Decision Analysis in Management Science
Management Science
Response to Comments on Brandão et al. (2005)
Decision Analysis
Proceedings of the 39th conference on Winter simulation: 40 years! The best is yet to come
Decision Analysis
Valuing Multifactor Real Options Using an Implied Binomial Tree
Decision Analysis
Evaluation of real options in an oil field
MACMESE'10 Proceedings of the 12th WSEAS international conference on Mathematical and computational methods in science and engineering
A Copulas-Based Approach to Modeling Dependence in Decision Trees
Operations Research
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Traditional decision analysis methods can provide an intuitive approach to valuing projects with managerial flexibility or real options. The discrete-time approach to real-option valuation has typically been implemented in the finance literature using a binomial lattice framework. Instead, we use a binomial decision tree with risk-neutral probabilities to approximate the uncertainty associated with the changes in the value of a project over time. Both methods are based on the same principles, but we use dynamic programming to solve the binomial decision tree, thereby providing a computationally intensive but simpler and more intuitive solution. This approach also provides greater flexibility in the modeling of problems, including the ability to include multiple underlying uncertainties and concurrent options with complex payoff characteristics.