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Real Options in Theory and Practice

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Author Info

  • Guthrie, Graeme

    (Victoria University of Wellington)

Abstract

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. Each book will feature a CD with spreadsheets intended for a broad range of real-world applications.

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Bibliographic Info

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This book is provided by Oxford University Press in its series OUP Catalogue with number 9780195380637 and published in 2009.

ISBN: 9780195380637
Order: http://ukcatalogue.oup.com/product/9780195380637.do
Handle: RePEc:oxp:obooks:9780195380637

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Web page: http://www.oup.com/

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Cited by:
  1. Arthur Grimes, 2011. "Building Bridges: Treating a New Transport Link as a Real Option," Working Papers 11_12, Motu Economic and Public Policy Research.
  2. Michi Nishihara, 2014. "Valuation of sequential R&D investment under technological, market, and rival preemption uncertainty," Discussion Papers in Economics and Business 14-13, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  3. Briglauer, Wolfgang, 2013. "The impact of regulation and competition on the adoption of fibre-based broadband services: Recent evidence from the European Union member states," 24th European Regional ITS Conference, Florence 2013 88494, International Telecommunications Society (ITS).
  4. Lewis Evans & Greame Guthrie & Andrea Lu, 2010. "A New Zealand Electricity Market Model: Assessment of the Effect of Climate Change on Electricity Production and Consumption," Working Papers 10_09, Motu Economic and Public Policy Research.
  5. Lund, Diderik & Nymoen, Ragnar, 2013. "Comparative statics for real options on oil: What stylized facts to use?," Memorandum 14/2013, Oslo University, Department of Economics.
  6. Tee, James & Scarpa, Riccardo & Marsh, Dan & Guthrie, Graeme, 2010. "A Binomial Tree Approach to Valuing Fixed Rotation Forests and Flexible Rotation Forests Under a Mean Reverting Timber Price Process," 2010 Conference, August 26-27, 2010, Nelson, New Zealand 96836, New Zealand Agricultural and Resource Economics Society.
  7. Cai, Xiaowei & Stiegert, Kyle W., 2014. "Market Analysis of Ethanol Capacity," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IAMA), vol. 17(1).
  8. Guthrie, Graeme, 2010. "House prices, development costs, and the value of waiting," Journal of Urban Economics, Elsevier, vol. 68(1), pages 56-71, July.
  9. Lewis Evans & Graeme Guthrie & Neil Quigley, 2012. "Contemporary Microeconomic Foundations for the Structure and Management of the Public Sector," Treasury Working Paper Series 12/01, New Zealand Treasury.

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