Talk:Real options valuation/Archives/2012

Category of real options

Title purpose, the total number of possible outcomes, The settings, Guides, directons, and parts.

Real options analysis / Real options theory / Strategic options

There seem to be several names for the same subject area, probably because it derives from several different fields.

This field allows inclusion of the net present value (NPV) of future management decisions (the real options) as a correction to traditional discounted cash flow methods.

There are several widely documented real options with general applicability (e.g. to manufacturing):
- abandonment
- timing (i.e. deferral/advance)
- acceleration or growth
- flexibility (switch, contract, outsource, etc.)

These may have applicability in hi-tech projects, or R&D fields:
- stage
-

copyright violations

I removed a lot of copyvio content from http://www-935.ibm.com/services/uk/igs/pdf/esr-calculating-value-during-uncertainty.pdf. I think I got it all, but other users might want to check for more. Calliopejen1 09:19, 25 July 2007 (UTC)

Merged content from Real Options Analysis

Have left that article for now; please comment or revert as appropriate... Fintor (talk) 12:09, 24 July 2009 (UTC)

I take it, that I may go ahead with the merge Fintor (talk) 17:33, 26 July 2009 (UTC)

Untitled

Um ... what is this? Should it be at Real options? -- Zoe

23:36, 21 November 2006 (UTC)

I agree this article is confusing and it's hard to know even where to start to change it. I'll try when I have some time. Links to other derivatives pages would certainly help.

above question:property) whose subtitles would be (film), (play), (book), (other). And please notice the online dictionary I referred to. Really, I don't think this is much ado about nothing. Did you read Eats, Shoots and Leaves? There are language sticklers out there. I don't think that Wikipedia wants to be the only encyclopedia to promote its use. JohnClarknew 16:44, 23 November 2006 (UTC)

I agree this article is very confusing. Much remains to be changed. I will modify it when i'll time. First, per definition, real options is the application of the (financial) option pricing theory to real investment situations. As a consequence, real options can and should be used for capital budgeting. Second, the difference between real options and NPV is not clearlx explained. NPV assumes that a once-undertaken project has typical cash flow stream: the basic principle of NPV is to determine expected cash flows and discount them as a discount rate which takes into consideration the risk inherent to the cash flow. Real Options is about determining certainty equivalent cash flows (by constructing a risk-free portfolio) and discounting them at the risk free-rate. Very good textbooks on real options, refer to either Dixit and Pindyck (1994), Investment under Uncertainty, Princeton University Press or Lenos Trigeorgis (1996), Real Options, MIT Press

In general you should not remove discussion from the talk page. I've removed an old paragraph of mine, since other material being removed, it was very much out of context. Smallbones (talk) 13:27, 2 September 2008 (UTC)

Valuation methods discussion

These methodologies are not standard or well-known and are at the periphery of the Real Options discussion, at best should be a footnote: Additional considerations include the fact that the stochastic nature of such projections can sometimes make analysis using the Monte Carlo method infeasible, necessitating other investigatory methods, such as Robinson differentials. Other new methods have thus recently been introduced to simplify the calculation of the real option value and make the numerical use of the methods easier for practitioners; these include the Datar-Mathews method (2004,2007) and the Fuzzy Pay-Off Method for Real Option Valuation (2008). — Preceding unsigned comment added by Dsplff (talk • contribs)

I BEG TO DIFFER ON THIS: These methods have been published in peer reviewed journals with respectable editorial boards by rather respectable individuals and offer a very different view on the valuation of real options from the methods coined in the 1970's. These methods will probably be pervasive in the future as the use of the Black Scholes and Binomial option valuation methods will die out as THE methods for real option valuation WITHIN the practicing community. For academics the mathematics of the closed form solutions may remain of interest for a long time. — Preceding unsigned comment added by 86.60.133.9 (talk • contribs) 20:44, 24 May 2011