Investment Project Valuation Based on the Fuzzy Real Options Approach

2010 ◽  
Author(s):  
Shu-Hsien Liao ◽  
Shiu-Hwei Ho
Keyword(s):  
Real Options ◽  
Investment Project ◽  
Project Valuation ◽  
Real Options Approach

scholarly journals REAL OPTIONS APPROACH: A BANK ACQUISITION BY BANK X

2010 ◽  
Vol 3 (1) ◽  
pp. 47-59
Author(s):  
Shantie Poespa Dewi ◽  
Junius Tirok
Keyword(s):  
Real Options ◽  
Banking Sector ◽  
Added Value ◽  
Target Firm ◽  
Real Options Theory ◽  
Regulatory Policies ◽  
Project Valuation ◽  
Real Options Approach ◽  
Real Value ◽  
Binomial Lattice

Indonesia offers a lot of promising growth opportunities and particularly to the banking industry, a combination of attractive macro-economic conditions and introduction of new regulatory policies as well as reformation to consolidate and strengthen the banking sector primarily by M&A activity provides an attractive backdrop for acquisition of Indonesian banks by foreign investors. In this paper, we introduce real options theory as an alternative to a traditional project valuation for a bank acquisition that would allow the acquiring firm to recognize the options embedded in their investments. The objective of this case study is to analyze, from real options perspective, whether the acquisitions of the target firm compliment the acquiring firm. The methods use for the analysis are DCF, Black-Scholes and Binomial Lattice that would help determine the project real value, which result suggested that the acquiring firm should reconsider their options. On this thesis, the DCF method suggesting that the acquisition of Bank Y by Bank X does increase the value of Bank X but there would not be added value on the synergy itself. While from the real options perspective, the project value (with and without real options flexibility) is worth less than the target firm underlying assets and has doubtful prospect.

Study on the Application of Real Options in Coal Resources Investment

2014 ◽  
Vol 978 ◽  
pp. 265-271
Author(s):  
Wu Da ◽  
Wan Li Xing
Keyword(s):  
Real Options ◽  
Real Option ◽  
Investment Decision ◽  
Investment Project ◽  
Theoretical Research ◽  
Coal Resources ◽  
The Real ◽  
Real Option Theory ◽  
Real Options Approach ◽  
Option Theory

This paper uses the real options approach to conduct research on the coal resources development investment decision by literature studies, the combination of theoretical research and practical research. It has carried on the systematic overall retrospect to the domestic and international research results about real option. It introduces and analyzes the real option theory on the basis of analyzing and appraising to the traditional investment methods systematically in detail. This paper has studied the value of the investment project again with the real option theory. It sums up the application area, step and analyzing frame of real option theory, and analyzes the insufficiency of the traditional investment decision on the basis of comparing with traditional coal resource investment decision, and proposes some improvement suggestions.

USING REAL OPTIONS IN AN INVESTMENT VALUATION AND DECISION-MAKING PROCESSES

2020 ◽  
Vol 1 (8) ◽  
pp. 43-46
Author(s):  
T. T. ADAMIYA ◽  
Keyword(s):  
Decision Making ◽  
Real Options ◽  
Financial Management ◽  
Significant Risk ◽  
Investment Project ◽  
Market Uncertainty ◽  
Investment Activity ◽  
Traditional Assessment ◽  
Decision Making Processes ◽  
Additional Value

The current stage of global development is characterized by opportunities for investment activity, along with an instability of the economic situation and high uncertainty, dictates the need for investors and managers to make effective decisions, taking into account constantly changing conditions. An investor, while making a decision which project to accept, for the most part, uses the standard methods of financial management as a basis for forecasting and analysis. Considering fast-moving processes of technology change, as well as the conditions of market uncertainty, significant risk and agency problems, the article proposes the use of real options as an insurance (hedging) tool for investors against risks at different stages of the investment project. Risk management can be carried out through real options - the tool of flexibility in decision making. Traditional assessment methods ignore the ability to adapt internal and external changes, however management flexibility can significantly reduce risks, and therefore create additional value.

scholarly journals Market-based instruments for risk-averse farmers: rubber agroforest conservation in Jambi Province, Indonesia

2016 ◽  
Vol 22 (2) ◽  
pp. 133-155 ◽  
Author(s):  
Utkur Djanibekov ◽  
Grace B. Villamor
Keyword(s):  
Income Inequality ◽  
Risk Aversion ◽  
Real Options ◽  
Risk Averse ◽  
Variance Model ◽  
Income Uncertainty ◽  
Real Options Approach ◽  
Pigovian Taxes ◽  
Rubber Agroforest ◽  
Mean Variance

AbstractThis paper investigates the effectiveness of different market-based instruments (MBIs), such as eco-certification premiums, carbon payments, Pigovian taxes and their combination, to address the conversion of agroforests to monoculture systems and subsequent effects on incomes of risk-averse farmers under income uncertainty in Indonesia. For these, the authors develop a farm-level dynamic mean-variance model combined with a real options approach. Findings show that the conservation of agroforest is responsive to the risk-aversion level of farmers: the greater the level of risk aversion, the greater is the conserved area of agroforest. However, for all risk-averse farmers, additional incentives in the form of MBIs are still needed to prevent conversion of agroforest over the years, and only the combination of MBIs can achieve this target. Implementing fixed MBIs also contributes to stabilizing farmers’ incomes and reducing income risks. Consequently, the combined MBIs increase incomes and reduce income inequality between hardly and extremely risk-averse farmers.

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