scholarly journals Applicative model for appraisal of investment projects based on real options methodology

2011 ◽  
Vol 6 (2) ◽  
pp. 269-282
Author(s):  
Dragan Loncar
Keyword(s):  
Real Options ◽  
Investment Projects ◽  
Applicative Model

Project portfolio valuation using real options

2020 ◽  
Vol 13 (2) ◽  
pp. 126-146
Author(s):  
A.B. Lanchakov ◽  
S.A. Filin ◽  
A.Zh. Yakushev
Keyword(s):  
Real Options ◽  
Real Option ◽  
Project Portfolio ◽  
Risk And Uncertainty ◽  
Expected Effect ◽  
Investment Projects ◽  
Financial Options ◽  
Portfolio Efficiency ◽  
The Face ◽  
Effective Development

Subject. The article analyzes the expected effect of a portfolio of projects in the face of risk and uncertainty, when using real options. Objectives. The purpose is to offer a more objective formula to assess the expected impact of a portfolio of projects for real investment objects under risk and uncertainty, using real options, and provide recommendations for improving the portfolio efficiency. Methods. The study draws on methods of real options and evaluation of investment projects through the real option value, the cash flow discounting method, synthesis, and mathematical modeling. Results. We systematized the main types of real options and developed a formula for calculating the expected effect of project portfolio implementation. The said formula shows that considering the additional long-term costs embedded in a portfolio of real options, which are associated with the use of these real options, and, therefore, reducing the overall risk of projects and the entire portfolio, permit to improve the objectivity of such calculations. Conclusions. When analyzing real options that have real assets as underlying instruments, it is often impossible to apply the computational formulae for financial options, as they differ significantly. The systematization of the main types of real options helps expand the range of application of management solutions. The offered formula enables to improve the efficiency of project insurance under risk and uncertainty and to use additional opportunities for effective development of the company.

Real options in business valuation and investment

2018 ◽  
Author(s):  
Андрей Гусев ◽  
Andrey Gusev
Keyword(s):  
Graduate Students ◽  
Real Options ◽  
Scientific Publication ◽  
Investment Analysis ◽  
Investment Activity ◽  
Business Valuation ◽  
Investment Projects ◽  
University Teachers ◽  
Specific Calculations

In the presented monograph discusses the major problems associated with the development of methods of investment analysis and application of real options method in the assessment of efficiency of investment projects and valuation of enterprise (business). Disclosed the content of the basic models of evaluation of real options, a classification of real options, the theoretical principles supported by specific calculations. Scientific publication intended for graduate students, University teachers, scientific employees, specializing in the field of management of investment activity of enterprises and business valuation.

scholarly journals Real Options and Discounted Cash Flow Analysis to Assess Strategic Investment Projects

2017 ◽  
Vol 30 (1) ◽  
pp. 91-101 ◽  
Author(s):  
Agnė Pivorienė
Keyword(s):  
Real Options ◽  
Cash Flow ◽  
Flow Analysis ◽  
Investment Decisions ◽  
Business Environment ◽  
Strategic Decision ◽  
Discounted Cash Flow ◽  
Strategic Investment ◽  
Investment Projects ◽  
Real Options Approach

Abstract In today’s uncertain and highly competitive business environment, the difficulty to make strategic investment decisions is growing. The dominant discounted cash flow analysis requires the assumption of perfect certainty of project cash flows. However, under uncertainty traditional DCF approach falls short of providing adequate strategic decision support, and this situation demands new methods for investment evaluation. Real options approach (ROA) has shown the potential for valuation of strategic corporate investment decisions and managerial flexibility in situations of high uncertainty. Under ROA, projects are viewed as real options that can be valued using financial option pricing techniques. This framework allows their owner to keep investment options open and to benefit from the upside potential of an opportunity while controlling the downside risk. The main aim of this research is to investigate the feasibility of real options approach and traditional DCF analysis for assessment of strategic investment projects under environmental uncertainty.

One Method to Identify the Real Options in the Investment Project

2019 ◽  
Vol 8 (3) ◽  
pp. 35-44
Author(s):  
Inas Nadrus ◽  
Valery Anshin ◽  
Igor Demkin
Keyword(s):  
Real Options ◽  
Present Article ◽  
Oil And Gas ◽  
Investment Project ◽  
Oil And Gas Industry ◽  
Specific Nature ◽  
Gas Industry ◽  
Investment Projects ◽  
Multiple Case ◽  
Multiple Case Studies

The present article describes a research that examines the sources of flexibility in the investment projects in the oil and gas industry using multiple case studies of several oil and gas projects. More precisely, the study is concerned with revealing uncertainties that give rise to real options. Ultimately, the methodology for real options identification in the exploration & development type of investment projects of the oil and gas industry is proposed. It is anticipated that the results might help to bring certain improvements into the existing managerial conception of using real options for investment project evaluation considering the specific nature of investment projects in the oil and gas industry.

scholarly journals Hard coal project valuation based on real options approach: multiplicative vs. arithmetic stochastic process

2016 ◽  
Vol 32 (1) ◽  
pp. 25-40 ◽  
Author(s):  
Piotr W. Saługa ◽  
Jacek Kamiński
Keyword(s):  
Stochastic Process ◽  
Real Options ◽  
Lattice Models ◽  
Hard Coal ◽  
List Type ◽  
Direct Impact ◽  
Discounted Cash Flow ◽  
Investment Projects ◽  
Managerial Flexibility ◽  
Project Valuation

Abstract Precise valuation of the economic efficiency of risky investment projects in the mineral sector has a direct impact on the range of future investments. Since the mid-90s, a number of enterprises have also been giving increased attention to the valuation of managerial flexibility that cannot normally be estimated with classical discounted cash flow (DCF) analysis. This has been the result of a development in the real options analysis (ROA) and the simplification of its algorithms, most of which have been achieved through: ♦ incorporating lattice models, ♦ introducing a single uncertain project parameter (gross present value, PV) as an underlying instrument, ♦ assuming that the underlying asset follows the multiplicative stochastic process, ♦ introducing the ‘marketed asset disclaimer’ (MAD) assumption. Unfortunately, in most cases, models constructed on the abovementioned assumptions and modifications are not consistent with real projects. Some analysts recognize that project PVs might not follow the multiplicative process, which could have a direct impact on the project’s value. In order to improve the MAD approach, the paper proposes a modified model where the multiplicative tree is replaced with an additive one. In addition, methods of ‘additive volatility’ calculation and ‘dividend’ adjustments were suggested.

scholarly journals COMPARATIVE ANALYSIS OF THE DISCOUNTED FLOW METHOD AND THE REAL OPTIONS METHOD AS APPROACHES TO THE EVALUATION OF INVESTMENT PROJECTS

2021 ◽  
Vol 1 (№7 2021) ◽  
pp. 78-82
Author(s):  
А.С. Тяпкина ◽  
N.D. Komova ◽  
А.В. Лихвойнен ◽  
В.I. Юхимец ◽  
V.S. Alexandrova
Keyword(s):  
Comparative Analysis ◽  
Real Options ◽  
The Real ◽  
Investment Projects ◽  
Flow Method

scholarly journals Real Options Valuation of Deposits

2019 ◽  
Vol 19 (2) ◽  
pp. 31-48
Author(s):  
Nikolay A. Magaev ◽  
Gagik M. Mkrtchyan ◽  
Larisa V. Skopina
Keyword(s):  
Real Options ◽  
Oil And Gas ◽  
Cash Flows ◽  
Investment Projects ◽  
Real Options Approach ◽  
Oil And Gas Fields ◽  
Real Options Valuation ◽  
Oil And Natural Gas ◽  
Main Instrument ◽  
Gas Fields

Income approach based on the method of discounted cash flows (DCF) seems to be the main instrument to evaluate economic efficiency of investment projects when developing oil and gas fields. However, at early stages of exploration and exploitation of hydrocarbon resources, uncertainty and risks of investors are very high, which limits the use of traditional methods. It is necessary to develop valuation tools accounting high uncertainty of input data on the exploitation of oil and natural gas resources, flexibility of their development by formation of rational production strategy with volatility of the operating parameters such as the world oil prices and the size and value of oil and gas reserves. In this article presents the real options approach which accounts the potential of flexible and adaptive project management providing advantages in assessing development projects as compared to the traditional income methods. Implementation of this method is exemplified by the case of oil and gas fields in the east of the Siberian platform.

scholarly journals Method of Real Options in Managing Investment Projects

2019 ◽  
Vol 8 (10) ◽  
pp. 2696-2699
Keyword(s):  
Project Management ◽  
Real Options ◽  
Service Level ◽  
Management Service ◽  
Strategic Decisions ◽  
The Real ◽  
Investment Projects ◽  
Efficient Management ◽  
Service Level Management ◽  
Key Factor

A key factor for the success of the project management is the availability of a clear pre-defined plan, minimizing risks and deviations from the plan, efficient management of changes (as opposed to process, functional management, service level management). Using the binomial method to estimate the value of real options, they proceed from the assumption that the number of links is discrete and known in advance. The logic of this approach requires that their number corresponding to the frequency of making the most significant decisions for the project. The nodes of the lattice should be those moments in time in which strategic decisions are made on reducing, developing, switching business, etc. In general, the use of the real options method extends the tools to justify decisions in managing investment projects.

Real Options for the Valuation of Investment Projects

2021 ◽  
pp. 20-33
Author(s):  
Raisa Pérez-Vas
Keyword(s):  
Decision Making ◽  
Real Options ◽  
Cash Flows ◽  
Theoretical Framework ◽  
The Real ◽  
Investment Projects ◽  
High Uncertainty

The objective of this chapter is to analyze the methodology for evaluating investment projects through real options. The limitations of traditional models based on cash flows and the current environment that presents constant changes and high uncertainty have led to a new field of research, real options. The valuation of investment projects carries inherent decision-making, where the best options for the company are analyzed, the real options providing a decision flexibility that classic models do not provide. This chapter contains the most important theoretical framework, where the beginnings of this methodology, the most important types of options, and the methodology for their evaluation are discussed, as well as two practical examples for a better understanding of this methodology.

Real Options Framework for Dealing with Uncertainty in Project Management: A Moroccan Infrastructure Project

2019 ◽  
Vol 01 (01) ◽  
Author(s):  
Jihane Gharib ◽  
Abdelaziz Berrado ◽  
Loubna Benabbou
Keyword(s):  
Real Options ◽  
Investment Project ◽  
Future Market ◽  
Decision Analysis Model ◽  
Business Managers ◽  
Analysis Model ◽  
The Real ◽  
Investment Projects ◽  
Real Options Valuation ◽  
Infrastructure Project

The Real Options Valuation allows for the consideration of possible options that are instinctively embedded in investment projects, in which the decision-makers have the flexibility to respond to the outcome of uncertainty. The business managers’ abilities to react to future market conditions tend to impact the value of the investment project by maintaining or improving the upside potential and limiting the downside loss. This process must be regulated by a decision analysis model, capable of capturing the particularities of each project. This paper presents detailed literature review of the real options, includes their area of applications in the literature, then proposes a framework to ease the understanding and the use of this method. Later, a case study of a Moroccan infrastructure project, that had already undergone an evaluation, is outlaid. The paper fully addresses the gaps of the previous study, provides a corrected model for an improved valuation of this project and a suitable use of real options. It also illustrates its application and analyzes the obtained results.

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