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Real Options Valuation: A Case Study of an E-commerce Company

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  • Rocío Sáenz-Diez
  • Ricardo Gimeno
  • Carlos de Abajo

Abstract

This paper presents a real options valuation model with original solutions to some issues that arise frequently when trying to apply these models to real-life situations. The authors build on existing models by introducing an innovative and intuitive risk neutral adjustment that allows us to work with all the simulated paths. The problem of incorporating real options into each path is solved with a "nearest neighbors" technique, and uncertainty is simulated using a beta distribution that adapts better to company-specific information. Copyright (c) 2008 Morgan Stanley.

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Bibliographic Info

Article provided by Morgan Stanley in its journal Journal of Applied Corporate Finance.

Volume (Year): 20 (2008)
Issue (Month): 2 ()
Pages: 129-143

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Handle: RePEc:bla:jacrfn:v:20:y:2008:i:2:p:129-143

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