Description
Book SynopsisDecision makers in business and economics face a staggering array of problems. Managers of growing firms have to decide which growth options will expand their business. Governments have to decide which infrastructure investments to undertake. Managers of oil firms must decide how rapidly to deplete their reserves. Owners of land must decide when and how to develop. Operators of power plants must decide when to start them up and when to shut them down. While these problems seem quite diverse, they share many important features. In each case, the decision maker must choose when to take a particular action that will be difficult, if not impossible, to reverse. In each case, the consequences of taking (or not taking) that action are uncertain. The timing and nature of these actions directly affect revenue. Real options that often vary radically from one problem to another. The book focuses on building a general approach to solving problems from the ground up to show readers how real optio
Table of ContentsPREFACE ; 1 Introduction ; I. Foundations ; 2. The modeling framework ; 3. Valuing single-period cash flows ; 4. Valuing multi-period cash flows ; 5. Combining valuation and decision making ; II Component Real Options ; 6. Options that do not affect the state of a project ; 7. Simple timing options ; 8. Compound timing options ; 9. Uber-compound timing options 200 ; 10. Switching options ; 11. Learning options ; III Calibrating the Model 293 ; 12. Calibration using spot and futures price data 294 ; 13. Calibration using option price data ; 14. Calibrating trees of alternative state variables ; IV Putting the Pieces Together ; 15. Forestry management and valuation ; 16. Developing a gas field ; 17. Mothballing an ethanol plant ; 18. Where to from here?
