Makhankov, V. G. and Aguero-Granados, M. A. (2010): Quantifying Flexibility Real Options Calculus.
Download (388kB) | Preview
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.
|Item Type:||MPRA Paper|
|Original Title:||Quantifying Flexibility Real Options Calculus|
|Keywords:||real options, Black-Scholes Approach, Wiener processes, stochastic processes, Quantifying Flexibility, volatility|
|Subjects:||C - Mathematical and Quantitative Methods > C0 - General > C02 - Mathematical Methods
G - Financial Economics > G0 - General > G00 - General
C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C60 - General
C - Mathematical and Quantitative Methods > C0 - General > C01 - Econometrics
|Depositing User:||Maximo Aguero|
|Date Deposited:||28 Mar 2011 09:04|
|Last Modified:||05 Feb 2016 15:49|
1. F. Black, and M. Scholcs.. The pricing of options and corporate liabilities, Journal of Political Economy, 8(1973)637-659.
2. K. B. Connolly. Buying and Selling Volatility. Wiley, Chichester, 1999.
3. J.C. Hull. Options, Futures, and other Derivative Securities. Prentice Hall, NJ, 1993.
4. J.C. Cox, S.A. Ross, and M. Rubinstein. Option pricing: A simplified Approach. J.Fin.Econ. 7(1979)229-263.
5. W. Margrabe. The value of an option to exchange one asset for another. J.Finance, 33(1978)177- 186.
6. S.C. Myers and S. Majd. Abandonment value and project life. Adv.Future & Option Research, 4(1990)1-21.
7. L. Trigeorgis. Real Options. MIT Press, Cambridge, Mass. 1998.
8. V. Makhankov. Finance Calculus. Markov Processes and Some Mathematical Models of Investment. Lecture Notes, Moscow, 1998, Santa Fe, 2000.
9. T. Copeland and V. Antikarov. Real Options. A Practitioner’s Guide. TEXERE, NY, 2001.
10. J. Cowan. An Introduction to the Mathematical Theory of Option Pricing and Related Topics. Lecture Notes, Santa Fe, Bios, 2000
11. D. Gardner and Y. Xhuang. Valuation of power generation assets: A real option approach. ALGO Research Quarterly. 3(2000)9-20