Real Options Analysis Course : Business Cases and Software Applications

✍ Scribed by Johnathan Mun

• Publisher: Wiley
• Year: 2003
• Tongue: English
• Leaves: 318
• Category: Library

✦ Synopsis

Praise for Real Options Analysis Course ''Dr. Mun's latest book is a logical extension of the theory and application presented in Real Options Analysis. More specifically, the Real Options Analysis Course presents numerous real options examples and provides the reader with step-by-step problem-solving techniques. After having read the book, readers will better understand the underlying theory and the opportunities for applying real option theory in corporate decision-making.'' -Chris D. Treharne, President, Gibraltar Business Appraisals, Inc. ''This text provides an excellent follow up to Dr. Mun's first book, Real Options Analysis. The cases in Real Options Analysis Course provide numerous examples of how the use of real options and the Real Options Analysis Toolkit software can assist in the valuation of strategic and managerial flexibility in a variety of arenas.'' -Charles T. Hardy, PhD, Chief Financial Officer & Director of Business Development, Panorama Research, Inc. ''Most of us come to real options from the perspective of our own areas of expertise. Mun's great skill with this book is in making real options analysis understandable, relevant, and immediately applicable to the field within which you are working.'' -Robert Fourt, Partner, Gerald Eve (UK) ''Mun provides a practical step-by-step guide to applying simulation and real options analysis-invaluable to those of us who are no longer satisfied with conventional valuation approaches alone.'' -Fred Kohli, Head of Portfolio Management, Syngenta Crop Protection Ltd. (Switzerland)

✦ Table of Contents

Real Options
Analysis Course......Page 4
Copyright......Page 5
Preface......Page 6
About the Author......Page 8
Contents......Page 10
Installing Crystal Ball Monte Carlo
Simulation Software......Page 16
Installing Real Options Analysis Toolkit Software......Page 23
Getting Started with Crystal Ball Software......Page 30
Getting Started with Real Options Analysis
Toolkit Software......Page 37
CHAPTER 3
Framing Real Options......Page 54
Step 1: Qualify List of Projects and Strategies......Page 55
Step 2: Forecast Base-Case Variables for Each Project......Page 56
Step 3: Create Static DCF Models for Each Case......Page 57
Step 4: Monte Carlo Simulation—DCF Outputs Become
Real Options Inputs......Page 58
Step 5: Framing the Real Options......Page 61
Step 6: Options Analytics, Simulation,
and Optimization......Page 69
Step 7: Reports, Presentations, and Update Analysis......Page 70
FINANCIAL ANALYSIS......Page 72
MONTE CARLO SIMULATION......Page 76
VOLATILITY ESTIMATES......Page 79
BINOMIAL LATTICES......Page 88
GRANULARITIES IN LATTICES......Page 92
State-Pricing Approach to Solving a European Option......Page 103
TRINOMIAL LATTICES AND AMERICAN OPTIONS......Page 105
OPTION TO ABANDON......Page 110
OPTION TO EXPAND......Page 120
OPTION TO CONTRACT......Page 132
OPTION TO CHOOSE......Page 141
COMPOUND OPTIONS......Page 151
CLOSED- FORM COMPOUND OPTIONS......Page 159
SEQUENTIAL COMPOUND OPTION......Page 163
CHANGING COSTS......Page 169
CHANGING VOLATILITY......Page 173
OPTION TO CONTRACT AND ABANDON......Page 177
BASIC BLACK- SCHOLES WITH DIVIDENDS......Page 182
BARRIER OPTIONS......Page 186
STOCHASTIC TIMING OPTIONS......Page 190
SWITCHING OPTION......Page 193
Closed-Form Equations and Binomial Convergence......Page 198
NONRECOMBINING LATTICES......Page 204
CHAPTER 7
Extended Problems: Combining Forecasting, DCF Modeling,
Real Options, and Optimization......Page 216
CHAPTER 8
Exercise Solutions......Page 228
CHAPTER 9
Real Options Analysis Toolkit Software Function
Description for Excel......Page 254
REAL OPTIONS VALUE TABLES......Page 266
IMPLIED VOLATILITY TABLES......Page 281
DIVIDEND IMPACT TABLES......Page 287
More, Faster, Cheaper—The Siren Call
of Upstream R&D......Page 296
Real Options Analysis Applied to Valuing
Start-Up Entities: The Digital News, Inc.......Page 299
Index......Page 310