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Real Options in Theory and Practice Graeme Guthrie (Professor, Professor, Victoria University of Wellington)

Real Options in Theory and Practice By Graeme Guthrie (Professor, Professor, Victoria University of Wellington)

Summary

Real options analysis is 30 years old, but there is still little guidance on how actually to implement it in practice. This book develops the building blocks of real options analysis and shows readers how to apply them to a wide variety of problems in business and economics.

Real Options in Theory and Practice Summary

Real Options in Theory and Practice by Graeme Guthrie (Professor, Professor, Victoria University of Wellington)

Decision makers in business and economics face a staggering array of problems. Managers of growing firms have to decide which growth options will expand their business. Governments have to decide which infrastructure investments to undertake. Managers of oil firms must decide how rapidly to deplete their reserves. Owners of land must decide when and how to develop. Operators of power plants must decide when to start them up and when to shut them down. While these problems seem quite diverse, they share many important features. In each case, the decision maker must choose when to take a particular action that will be difficult, if not impossible, to reverse. In each case, the consequences of taking (or not taking) that action are uncertain. The timing and nature of these actions directly affect revenue. Real options that often vary radically from one problem to another. The book focuses on building a general approach to solving problems from the ground up to show readers how real options can be assembled in a way appropriate to the individual problem being analyzed. The book will inform both practitioners who want to develop their analytical techniques and also graduate students who will eventually become practitioners. The real-options approach to capital budgeting (and business decision-making more generally) was introduced 30 years ago and is now widely accepted. While there are now many books that introduce the concept of real options to a general business audience, students and practitioners have been given little guidance as to how to actually implement these concepts in practice.

About Graeme Guthrie (Professor, Professor, Victoria University of Wellington)

Graeme Guthrie is a professor in the School of Economics and Finance at Victoria University of Wellington.

Table of Contents

PREFACE ; 1 Introduction ; I. Foundations ; 2. The modeling framework ; 3. Valuing single-period cash flows ; 4. Valuing multi-period cash flows ; 5. Combining valuation and decision making ; II Component Real Options ; 6. Options that do not affect the state of a project ; 7. Simple timing options ; 8. Compound timing options ; 9. Uber-compound timing options 200 ; 10. Switching options ; 11. Learning options ; III Calibrating the Model 293 ; 12. Calibration using spot and futures price data 294 ; 13. Calibration using option price data ; 14. Calibrating trees of alternative state variables ; IV Putting the Pieces Together ; 15. Forestry management and valuation ; 16. Developing a gas field ; 17. Mothballing an ethanol plant ; 18. Where to from here?

Additional information

NPB9780195380637
9780195380637
0195380630
Real Options in Theory and Practice by Graeme Guthrie (Professor, Professor, Victoria University of Wellington)
New
Hardback
Oxford University Press Inc
2009-07-30
432
N/A
Book picture is for illustrative purposes only, actual binding, cover or edition may vary.
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