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Real Options and Investment under Uncertainty : Classical Readings and Recent Contributions - Eduardo S. Schwartz

Real Options and Investment under Uncertainty

Classical Readings and Recent Contributions

By: Eduardo S. Schwartz (Editor), Lenos Trigeorgis (Editor)

Paperback Published: 3rd September 2004
ISBN: 9780262693189
Number Of Pages: 881
For Ages: 18+ years old

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The study of investment under uncertainty was stagnant for several decades, until recent developments in real options provided the tools to revitalize the field. The techniques and insights derived from option pricing can now be used to quantify the elusive elements of managerial operating flexibility and strategic interactions ignored or underestimated by conventional Net Present Value and other quantitative approaches.Topics covered include the reasons for the under-investment problem and conceptual frameworks for viewing productive investment opportunities as real options; useful valuation building blocks; the quantifying of various types of real options separately and in combination; strategic aspects of investment under uncertainty; numerical analysis techniques; a variety of applications, including the valuing of natural resources, R&D and pioneer ventures, land development, strategic acquisitions, government subsidies, power plants and pollution options, flexible manufacturing, and multinational operations; and empirical evidence from oil leasing, land prices, and discontinued operations.

"A book of carefully chosen readings on real options is long overdue; the recognition that nearly every serious investment decision has important embedded options has spawned a growing and vibrant literature. Real Options and Investment Uncertainty will be an indispensable reference for both the practitioner who is looking for guidance and the academic who would like to know more about this new research area." - Stephen Ross, Franco Modigliani Professor of Finance and Economics, Massachusetts Institute of Technology

Prefacep. ix
Real Options and Investment under Uncertainty: An Overviewp. 1
Underinvestment and Conceptual Options Approachesp. 17
Finance Theory and Financial Strategyp. 19
Today's Options for Tomorrow's Growthp. 33
Valuing Managerial Flexibilityp. 47
The Options Approach to Capital Investmentp. 61
A Conceptual Options Framework for Capital Budgetingp. 79
Review of some Basic Modelsp. 101
Real Options: An Overviewp. 103
A New Approach to Evaluating Natural Resource Investmentsp. 135
Investment and Hysteresisp. 153
The General Flexibility to Switch: Real Options Revisitedp. 179
Irreversibility, Uncertainty, and Investmentp. 199
Valuing Various Real Optionsp. 251
The Value of Waiting to Investp. 253
Time to Build, Option Value, and Investment Decisionsp. 273
Abandonment Value and Project Lifep. 295
Irreversible Investment, Capacity Choice, and the Value of the Firmp. 313
Evaluating Natural Resource Investmentsp. 335
The Nature of Option Interactions and the Valuation of Investments with Multiple Real Optionsp. 359
Strategy and Competitionp. 383
Strategy as a Portfolio of Real Optionsp. 385
The Value of Options in Strategic Acquisitionsp. 405
Capital Budgeting for Interrelated Projects: A Real Options Approachp. 419
Flexibility and Commitment in Strategic Investmentp. 451
Strategic Growth Optionsp. 499
Investment in Technological Innovations: An Option Pricing Approachp. 517
Numerical Techniquesp. 537
A Log-transformed Binomial Numerical Analysis Method for Valuing Complex Multi-Option Investmentsp. 539
Finite Difference Methods and Jump Processes Arising in the Pricing of Contingent Claims: A Synthesisp. 559
Valuation by Approximation: A Comparison of Alternative Option Valuation Techniquesp. 571
Simulation and Numerical Methods in Real Options Valuationp. 601
Applicationsp. 621
Applications of Option-Pricing Theory: Twenty-Five Years Laterp. 623
Scientific Management at Merck: An Interview with CFO Judy Lewentp. 633
Case Studies on Real Optionsp. 641
The Value of Flexibility: The Case of a Dual-Fuel Industrial Steam Boilerp. 663
A Real Options Application in Natural-Resource Investmentsp. 679
Managing Investment Opportunities under Price Uncertainty: From "Last Chance" to "Wait and See" Strategiesp. 689
Urban Land Prices under Uncertaintyp. 719
Investments of Uncertain Cost: An Application to the Construction of Nuclear Power Plantsp. 733
Operating Flexibility, Global Manufacturing, and the Option Value of a Multinational Networkp. 743
Empirical Evidencep. 771
Option Valuation of Claims on Real Assets: The Case of Offshore Petroleum Leasesp. 773
Empirical Testing of Real Option-Pricing Modelsp. 803
Investor Valuation of the Abandonment Optionp. 823
Sourcesp. 855
Indexp. 857
Table of Contents provided by Ingram. All Rights Reserved.

ISBN: 9780262693189
ISBN-10: 0262693186
Series: The MIT Press
Audience: Professional
For Ages: 18+ years old
Format: Paperback
Language: English
Number Of Pages: 881
Published: 3rd September 2004
Publisher: MIT Press Ltd
Country of Publication: US
Dimensions (cm): 22.9 x 17.8  x 3.8
Weight (kg): 1.36