Journal ArticleDOI
Decision Analysis and Real Options: A Discrete Time Approach to Real Option Valuation
TLDR
This paper seeks to enhance the real options methodology developed by Copeland and Antikarov with traditional decision analysis tools to propose a discrete time method that allows the problem to be specified and solved with off the shelf decision analysis software.Abstract:
In this paper we seek to enhance the real options methodology developed by Copeland and Antikarov (2001) with traditional decision analysis tools to propose a discrete time method that allows the problem to be specified and solved with off the shelf decision analysis software. This method uses dynamic programming with an innovative algorithm to model the project’s stochastic process and real options with decision trees. The method is computationally intense, but simpler and more intuitive than traditional methods, thus allowing for greater flexibility in the modeling of the problem.read more
Citations
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Journal ArticleDOI
Using Binomial Decision Trees to Solve Real-Option Valuation Problems
TL;DR: This work uses dynamic programming to solve the binomial decision tree with risk-neutral probabilities to approximate the uncertainty associated with the changes in the value of a project over time and provides greater flexibility in the modeling of problems.
Journal ArticleDOI
Real Options in Operations Research: A Review
TL;DR: This work reviews 164 papers that appeared in five internationally-renowned OR journals in the last twelve years, cataloguing the main subject themes and contributions where the Real Options approach has been most valuable to Operations Research.
Journal ArticleDOI
Discrete time modeling of mean-reverting stochastic processes for real option valuation
Warren J. Hahn,James S. Dyer +1 more
TL;DR: The recombining binomial lattice approach for modeling real options and valuing managerial flexibility is generalized to address a common issue in many practical applications, underlying stochastic processes that are mean-reverting.
Journal ArticleDOI
Supply chain networks with global outsourcing and quick-response production under demand and cost uncertainty
Zugang Liu,Anna Nagurney +1 more
TL;DR: This paper develops a modeling and computational framework for supply chain networks with global outsourcing and quick-response production under demand and cost uncertainty and formulate the governing equilibrium conditions of the competing decision-makers who are faced with two-stage stochastic programming problems.
Journal ArticleDOI
Generalised soft binomial American real option pricing model (fuzzy–stochastic approach)
TL;DR: Generalised hybrid fuzzy-stochastic binomial American real option model under fuzzy numbers (T-numbers), combination of risk and vagueness and Decomposition principle is proposed and described.
References
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Journal ArticleDOI
The Pricing of Options and Corporate Liabilities
Fischer Black,Myron S. Scholes +1 more
TL;DR: In this paper, a theoretical valuation formula for options is derived, based on the assumption that options are correctly priced in the market and it should not be possible to make sure profits by creating portfolios of long and short positions in options and their underlying stocks.
Book
Investment Under Uncertainty
Avinash Dixit,Robert S. Pindyck +1 more
TL;DR: In this article, Dixit and Pindyck provide the first detailed exposition of a new theoretical approach to the capital investment decisions of firms, stressing the irreversibility of most investment decisions, and the ongoing uncertainty of the economic environment in which these decisions are made.
Book
Theory of rational option pricing
TL;DR: In this paper, the authors deduced a set of restrictions on option pricing formulas from the assumption that investors prefer more to less, which are necessary conditions for a formula to be consistent with a rational pricing theory.
Book
Options, Futures, and Other Derivatives
TL;DR: The Black-Scholes analysis of stock option prices was used in this paper to model the behavior of stock prices and the Yield Curve of stock options, as well as the Black's model for option pricing.
Journal ArticleDOI
Option pricing: A simplified approach☆
TL;DR: In this paper, a simple discrete-time model for valuing options is presented, which is based on the Black-Scholes model, which has previously been derived only by much more difficult methods.