1,721,029 research outputs found
An Improved Binomial Lattice Method for Multi-Dimensional Options
No full textWe propose a binomial lattice approach for valuing options whose payoff depends on multiple state variables following correlated geometric Brownian processes. The proposed approach relies on two simple ideas: a log-transformation of the underlying processes, which is step by step consistent with the continuous--time diffusions, as proposed by Trigeorgis (1991), and a change of basis of the asset span, to transform asset prices into uncorrelated processes. We apply an additional transformation to approximate drift-less dynamics. Even if these features are simple and straightforward to implement, we show that they significantly improve the efficiency of the multi-dimensional binomial algorithm. We provide a thorough test of efficiency compared to most popular binomial and trinomial lattice approaches for multi--dimensional diffusions. Although the order of convergence is the same for all lattice approaches, the proposed method shows improved efficiency
The Nature of Option Interactions and the Valuation of Investments with Multiple Real Options
No full textBidding for the Antamina Mine: Incentives in a Real Option Context
No full textThis chapter studies the bidding for a copper mine that was offered for sale by the Peruvian government as part of the country's privatization program. The mine itself had a valuable real option component, in the form of the right to develop the mine after completing exploration, which we analyze using Monte Carlo methods. The novel aspect of the transaction was the type of bid requested by the Peruvian government, which essentially requested bidders to state both the premium that they would pay and exercise price they would set for this real option. This structure gave rise to incentives which affected the amount that firms would offer, their preferences between bidding premium and exercise price, the identity of bidders, the likelihood of ultimate development, and the likelihood of ex post renegotiation of the contract
Opções reais e interações com a flexibilidade financeira
No full textThis paper has two main goals. First, it provides a comprehensive overview of the existing real options literature and applications, and presents practical principles for quantifying the value of various real options. Second, it takes a first step towards extending the real options literature to recognize interactions with financial flexibility. The comprehensive literature review traces the evolution of the real options revolution, organized around thematic developments covering the early criticisms, conceptual approaches, foundations and building blocks, risk-neutral valuation and risk adjustment, analytic contributions in valuing different options separately, option interactions, numerical techniques, competition and strategic options, various applications, and future research directions.Este estudo tem dois objetivos principais. Primeiro, fornece um panorama abrangente da literatura e das aplicações existentes em opções reais, apresentando princípios práticos para a quantificação do valor das opções reais. Segundo, dá um primeiro passo para ampliar a literatura sobre opções reais para que ela reconheça interações com a flexibilidade financeira. A revisão da literatura acompanha a evolução da revolução das opções reais com base em desdobramentos temáticos que tratam das críticas iniciais, das abordagens conceituais, das bases e blocos componentes, da valoração neutra em relação ao risco e do ajuste ao risco, das contribuições analíticas da valoração de diferentes opções separadamente, das interações entre opções, das técnicas numéricas, das opções competitivas e estratégicas, das diversas aplicações e da direção da pesquisa no futuro
A Log-Transformed Binomial Numerical Analysis Method for Valuing Complex Multi-Option Investments
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