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
Reihe
Sprache
Verlagsort
Verlagsgruppe
Pearson Education Limited
Zielgruppe
Maße
Höhe: 297 mm
Breite: 211 mm
Dicke: 11 mm
Gewicht
ISBN-13
978-0-273-65093-5 (9780273650935)
Copyright in bibliographic data is held by Nielsen Book Services Limited or its licensors: all rights reserved.
Schweitzer Klassifikation
Sydney Howell is a Senior Lecturer in Management Accounting and Control at Manchester Business School. He has degrees from Cambridge and Manchester, and has industrial experience with Alcan, RHM, Philips and IBM Belgium. He teaches internationally for various companies including IBM, Tesco and C&A, and teaches and researches on real options. A paper on real options, co-authored with Axel Jaegle, was rated "internationally excellent" by Anbar. Mustafa Cavus is a senior consultant with Capstone Energy Consulting based in Houston, and specialises in various fields including options and futures in electricity generation. Mustafa holds Master's degree from German and British Universities, as well as PhD from Manchester Business School, which he wrote in his third working language, English. Mustafa remains in close contact and collaboration with MBS, which offered him a post-doctoral fellowship on his graduation. David Newton is Lecturer in Accounting and Finance at Manchester Business School. He began his career as a physical chemist at Cambridge, Bristol, Glasgow and Warwick Universities but later converted to financial teaching and research. He wrote a seminal and widely quoted early paper on the applications od options theory to R&D. His research interests include improving the numerical methods for real options valuation, and for this purpose he is in close research collaborations with the Mathematics Department of Manchester University. Dean Paxson is Professor of Finance at Manchester Business School. He is one of the best known consultants and researchers on real options both in the UK and internationally. A Rhodes Scholar at Oxford and a Harvard DBA, he has long been a researcher and consultant in energy, especially in the valuation of oil and gas reserves, where he was one of the first to recognise the importance of real options. His research interests include risk management, the modelling of unlikely and extreme events and the improvement of numerical methods for option valuation. His interest in real options for soccer teams is probably unusual for an American. Andrew Stark is Professor of Accounting at Manchester Business School and presently Director of the Manchester MBA programme. A graduate of Cambridge and Manchester, he has taught at Maryland, Yale and Manchester universities among others. He is well known contributor to international conferences on real options and his current research interest include the agency aspects of real options. These model what can happen when superiors and subordinates have different information sets, e.g. how can subordinates be motivated to take option decisions in the superior's best interests, and what options do superiors and subordinates enjoy against each other?
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
