The six chapters in this volume consider the theory, methods, and applications of real options
in energy and commodity markets.
In this paper, we propose a model that combines a Discounted Cash Flow model with real options
in order to take into account the different drivers of real estate investment value, such as net asset value, future rentals income and capital expenditures policy.
What is frequently overlooked is to identify the management options also known as real options
(to shutdown, to expand, to change price, etc.
Of the four options, clearly two are not real options
, business as usual and negotiation.
The first article, "Valuation of Real Options
as Competitive Prototyping in System Development," by Diana I.
This paper provides an overview of the real options
approach to valuation mainly from the point of view of the author who has worked in this area for over 30 years After a general introduction to the subject, numerical procedures to value real options
, ambiguity, risk and insurance; world class university program in financial engineering, Ajou University; v.
valuation theory is well developed and often used in financial markets, but infrequently applied in real estate appraisal.
Their paper entitled, "A Dynamic Model of Health Plan Choice from a Real Options
Perspective," appeared in the December 2011 issue of the AEJ.
are generally distinguished from conventional financial options in that they are not typically traded as securities, and do not usually involve decisions on an underlying asset that is traded as a financial security.
The method which allows us to value the company and its investment projects in conditions of uncertainty, taking into consideration the ability of the company to react to changes taking place in the economy, is defined as Real Option
Valuation (ROV), also often termed Real Options
Essentially, a real options
approach recognizes that managers invest in projects in stages based on new information that more closely reflects the realities of firms' rapidly changing operational and competitive environments.