Real Options
Evaluating Corporate Investment Opportunities in a Dynamic World
Published on 7. August 2001
Book
Paperback/Softback
320 pages
978-0-273-65302-8 (ISBN)
Description
What is the correct price to pay for a brand? When should you cease operating an asset? What should the maximum investment in a research project be? How much should you buy or sell technology or a licence for Real option analysis enables us to integrate our decisions on investment, operations and disinvestment, and is altering economics, strategy, psychology and other disciplines. It follows the understanding that at least one of the value-determining variables is evolving unforecastably, following a random walk, but there will be flexibility in how we respond as that uncertainty unfolds. Real option analysis is a development from the methods by which financial markets value an option on a stock or share. It helps us decide how much money we should spend to acquire an economic opportunity and when we should commit ourselves to one of the available decisions. Real option analysis is increasingly being used by companies to value intangible assets. However, due to the mathematical complexity of analyzing real options, they are only now becoming essential to corporate strategy. Real Options will provide the reader with a comprehensive understanding of the concepts behind real option analysis and how to use them. It demystifies the scientific aura surrounding the subject, giving the reader the understanding necessary to direct or apply real options analysis in any organizational setting. Real Options will:
introduce real options, what they are, why they are important and when to use them
explain the essential concepts of real and financial options analysis
illustrate how to apply financial option concepts to real options
explain how to build and solve real option models
highlight the limitations and pitfalls of real option analysis
provide foresight into the future of real option analysis
provide worked practical examples and case studies from the world of real estate, sport management, power generation and operations.
Written by a team of authors from (and linked) to Manchester Business School who have experience in teaching practitioners and students alike in the field of real options, this book will guide the reader from a basic level through to more advanced analysis. Real Options will prove essential reading for finance practitioners, finance consultants, MBA and finance students, and general managers.
introduce real options, what they are, why they are important and when to use them
explain the essential concepts of real and financial options analysis
illustrate how to apply financial option concepts to real options
explain how to build and solve real option models
highlight the limitations and pitfalls of real option analysis
provide foresight into the future of real option analysis
provide worked practical examples and case studies from the world of real estate, sport management, power generation and operations.
Written by a team of authors from (and linked) to Manchester Business School who have experience in teaching practitioners and students alike in the field of real options, this book will guide the reader from a basic level through to more advanced analysis. Real Options will prove essential reading for finance practitioners, finance consultants, MBA and finance students, and general managers.
Reviews / Votes
"embraced by the USA's top business schools and consulting firms, real option valuation could quickly become the new standard for valuing risky ventures" USA Today, Ma y 1999More details
Series
Language
English
Place of publication
Harlow
United Kingdom
Publishing group
Pearson Education Limited
Target group
Professional and scholarly
Dimensions
Height: 241 mm
Width: 163 mm
Thickness: 29 mm
Weight
670 gr
ISBN-13
978-0-273-65302-8 (9780273653028)
Copyright in bibliographic data and cover images is held by Nielsen Book Services Limited or by the publishers or by their respective licensors: all rights reserved.
Schweitzer Classification
Persons
Sydney Howell
is a Senior Lecturer in Management Accounting and Control at Manchester Business School. He has over 20 years experience as a teacher, manager and consultant in all areas of real options, and has taught for many companies including IBM, Tesco and C&A.
Andrew Stark is Professor of Accounting at Manchester Business School, and is presently Director of the Manchester MBA programme. He is a well-known contributor to conferences on real options and has taught at Maryland, Yale and Manchester universities.
David Newton is Lecturer in Accounting and Finance at Manchester Business School, and has a wide-ranging expertise in teaching real options theory and practice to students and practitioners alike. He wrote a seminal paper on the application of options theory to R&D.
Dean Paxson is Professor of Finance and Accounting at Manchester Business School where he has taught real options to MBAs for several years. He was educated at Amherst College, Oxford and Harvard Business School, and has a number of well-received books on real options.
Mustafa Cavus is a senior consultant with Capstone Energy Consulting, and specialises, among other fields, in options and futures in electricity generation. Mustafa holds Master's degrees from German and British universities, as well as a PhD from Manchester Business School.
Jose Antonio de Azevedo-Pereira is a graduate of ISEG (Technical University of Lisbon) and Manchester Business School. He is presently Professor Auxiliar at ISEG and has previously held a number of Board and Executive positions in Portuguese companies.
Kanak Patel is Lecturer in Property Finance at the Department of Land Economy, University of Cambridge. Initially a risk analyst at Lloyd's of London, she has also taught finance at Manchester Business School and at the Management School, Imperial College, University of London.
is a Senior Lecturer in Management Accounting and Control at Manchester Business School. He has over 20 years experience as a teacher, manager and consultant in all areas of real options, and has taught for many companies including IBM, Tesco and C&A.
Andrew Stark is Professor of Accounting at Manchester Business School, and is presently Director of the Manchester MBA programme. He is a well-known contributor to conferences on real options and has taught at Maryland, Yale and Manchester universities.
David Newton is Lecturer in Accounting and Finance at Manchester Business School, and has a wide-ranging expertise in teaching real options theory and practice to students and practitioners alike. He wrote a seminal paper on the application of options theory to R&D.
Dean Paxson is Professor of Finance and Accounting at Manchester Business School where he has taught real options to MBAs for several years. He was educated at Amherst College, Oxford and Harvard Business School, and has a number of well-received books on real options.
Mustafa Cavus is a senior consultant with Capstone Energy Consulting, and specialises, among other fields, in options and futures in electricity generation. Mustafa holds Master's degrees from German and British universities, as well as a PhD from Manchester Business School.
Jose Antonio de Azevedo-Pereira is a graduate of ISEG (Technical University of Lisbon) and Manchester Business School. He is presently Professor Auxiliar at ISEG and has previously held a number of Board and Executive positions in Portuguese companies.
Kanak Patel is Lecturer in Property Finance at the Department of Land Economy, University of Cambridge. Initially a risk analyst at Lloyd's of London, she has also taught finance at Manchester Business School and at the Management School, Imperial College, University of London.
Content
1. Introduction to real options and analysis
2. Essential option concepts
3. Applying financial option concepts to real options
4. Some modelling techniques for tackling and solving real options problems
5. Real football options in Manchester
6. Valuing a power plant under uncertainty
7. Two case studies on real estate development
8. DixPin Biotech Plc - a simple example of a binary option
9. Real urban development options at Canary Wharf
10. Options embedded in house mortgages: A valuation with two random walk factors
11. Some further real options topics
12. The pitfalls of real options analysis and how to avoid them
13.The future of real options analysis.
14. Summary
Appendices
2. Essential option concepts
3. Applying financial option concepts to real options
4. Some modelling techniques for tackling and solving real options problems
5. Real football options in Manchester
6. Valuing a power plant under uncertainty
7. Two case studies on real estate development
8. DixPin Biotech Plc - a simple example of a binary option
9. Real urban development options at Canary Wharf
10. Options embedded in house mortgages: A valuation with two random walk factors
11. Some further real options topics
12. The pitfalls of real options analysis and how to avoid them
13.The future of real options analysis.
14. Summary
Appendices