A fuzzy expert system for solving real-option decision processes
AbstractThis paper presents a new approach to real options. The current options-based models have provided new insights into capital-budgeting decisions. Unfortunately they are not widely used by corporate managers and practitioners as they are formally complex, rather difficult to understand and rest on strong implicit assumptions that considerably limit their scope of application. We propose a possible alternative by using a fuzzy expert system, on the basis of Mastroleo, Facchinetti and Magni (2001). We draw up a decision tree with multiple uncertain variables affecting the value of an investment opportunity, consisting of a defer option, a growth option, an abandonment option. Some simulations are conducted to test the economic soundness of the model as well as its consistency with the current models in the literature. A rather refined study can be accomplished by showing how inputs and outputs of the model interrelate one another.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by MASTER CONSULTORES in its series PROYECCIONES FINANCIERAS Y VALORACION with number 005677.
Date of creation: 19 Jun 2009
Date of revision:
Contact details of provider:
fuzzy logic; expert systems; real option;
Other versions of this item:
- Magni, C. A. & Mastroleo G. & Facchinetti, G., 2001. "A Fuzzy expert system for solving ReaL-Option decision processes," Fuzzy Economic Review, International Association for Fuzzy-set Management and Economy (SIGEF), International Association for Fuzzy-set Management and Economy (SIGEF), vol. 0(2), pages 51-73, November.
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
- C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Magni, Carlo Alberto, 2007. "Investment decisions, equivalent risk and bounded rationality," MPRA Paper 6073, University Library of Munich, Germany.
- Magni, Carlo Alberto, 2007.
"Rating and ranking firms with fuzzy expert systems: the case of Camuzzi,"
5646, University Library of Munich, Germany.
- Magni, Carlo Alberto, 2004. "Rating and ranking firms with fuzzy expert systems: the case of Camuzzi," MPRA Paper 5889, University Library of Munich, Germany.
- Malagoli, Stefano & Mastroleo, Giovanni & Magni, Carlo Alberto, 2005.
"The use of fuzzy logic and expert systems for rating and pricing firms: a new perspective on valuation,"
11958, University Library of Munich, Germany.
- Stefano Malagoli & Carlo Alberto Magni & Giovanni Mastroleo, 2007. "The use of fuzzy logic and expert systems for rating and pricing firms: A new perspective on valuation," Managerial Finance, Emerald Group Publishing, Emerald Group Publishing, vol. 33(11), pages 836-852.
- Kraemer, Christian & Madlener, Reinhard, 2009. "Using Fuzzy Real Options Valuation for Assessing Investments in NGCC and CCS Energy Conversion Technology," FCN Working Papers, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN) 3/2009, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ignacio Velez).
If references are entirely missing, you can add them using this form.