Munich Personal RePEc Archive

Quantifying Flexibility Real Options Calculus

Makhankov, V. G. and Aguero-Granados, M. A. (2010): Quantifying Flexibility Real Options Calculus.

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Abstract

We expose a real options theory as a tool for quantifying the value of the operating flexibility of real assets. Additionally, we have pointed out that this theory is an appropriated methodology for determining optimal operating policies, and provide an example of successful application of our approach to power industries, specifically to valuate the power plant of electricity. In particular by increasing the volatility of prices will eventually lead to higher assets values.

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