Munich Personal RePEc Archive

A Fuzzy Pay-off Method for Real Option Valuation

Collan, Mikael and Fullér, Robert and József, Mezei (2008): A Fuzzy Pay-off Method for Real Option Valuation.

[img]
Preview
PDF
MPRA_paper_13601.pdf

Download (697kB) | Preview

Abstract

Real Options analysis offers interesting insights on the value of assets and on the profitability of investments, which has made real options a growing field of academic research and practical application. Real option valuation is, however, often found to be difficult to understand and to implement due to the quite complex mathematics involved. Recent advances in modeling and analysis methods have made real option valuation easier to understand and to implement. This paper presents a new method (fuzzy pay-off method) for real option valuation using fuzzy numbers that is based on findings from earlier real option valuation methods and from fuzzy real option valuation. The method is intuitive to understand and far less complicated than any previous real option valuation model to date. The paper also presents the use of number of different types of fuzzy numbers with the method and an application of the new method in an industry setting.

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.