RealOptionsAnalysis

Real Options Analysis provides a novel view of evaluating capital investment strategies by taking into consideration the strategic decision-making process. The book provides a qualitative and quantitative description of real options, the methods used in solving real options, why and when they are used, and the applicability of these methods in decision-making. In addition, multiple business cases and real-life scenarios are discussed. This includes presenting and framing the problems, as well as introducing a stepwise quantitative process developed by the author for solving these problems using the different methodologies inherent in real options. Included are technical presentations of models and approaches used as well as their theoretical and mathematical justifications. The book is divided into two parts. The first part looks at the qualitative nature of real options, providing actual business cases and applications of real options in the industry, as well as high-level explanations of how real options provide much-needed insights in decision-making. The second part of the book looks at the quantitative analysis, complete with worked-out examples and mathematical formulae. This book is targeted at both the uninitiated professional as well as those verbose in real options applications. It is also applicable for use as a secondyear M.B.A.-level or introductory Ph.D.-level textbook. A comprehensive CD-ROM is included in the book. The CD-ROM consists of Real Options Analysis Toolkit software with 69 real options models, Crystal Ball® Monte Carlo Simulation software, and a series of example options analysis spreadsheets. For those who are interested in further expanding their knowledge of real options analysis and applying it to real-life corporate situations, a companion book of business cases and supporting software by the same author will be available by Wiley in early 2003. Please visit www.wileyfinance.com for more information. The upcoming book focuses purely on real options business problems and their step-by-step resolution. The problems are solved both analytically and using the accompanying real options software. The methodolgies employed include stochastic forecasting, discounted cash flow analysis, Monte Carlo simulation, stochastic optimization, and real options analysis (using binomial lattices, risk-neutral probability, marketreplicating approach, state-pricing, trinomials, and closed-form models).