Real Options Analysis: Tools and Techniques for Valuing Strategic Investments and Decisions (Wiley Finance) - Hardcover

Mun, Johnathan

Hardcover

ISBN 10: 047125696X ISBN 13: 9780471256960

Publisher: John Wiley & Sons, 2002

Synopsis

Cutting–edge information on the valuation and application of real options
Most investors and risk managers are familiar with financial options. But the real option structure is embedded in billions of dollars of stocks traded every day, and in billions of dollars of strategic or investment decisions made by many companies. Real options are a useful tool to guide a firm′s strategic planning, and can create or enhance a firm′s value.
Real Options Analysis provides a revolutionary approach to evaluating and valuing capital investment strategies by taking into consideration the real options inherent in the strategic decision–making process. This book provides readers with a qualitative and quantitative description of real options, the methods used in solving real options, why and when they are used, and the applicability of these methods in decision–making. In addition, multiple business cases and real–life scenarios are discussed. This includes presenting and framing the problems, as well as the introduction of a stepwise quantitative process developed by the author for solving these problems using the different methodologies inherent in real options–with the assistance of Real Options software powered by Crystal Ball(TM), which is included on the companion CD–ROM. With technical presentations of models and approaches backed by theoretical and mathematical justifications, Real Options Analysis is one of the most comprehensive guides available on real options.

About this title

About the Author

JOHNATHAN MUN is Vice President of Analytical Services at Decisioneering, Inc., the makers of Crystal Ball(r) analytical software. His duties focus primarily on heading up the development of real options and financial analytics software powered by Crystal Ball(r). Prior to joining Decisioneering, he was a consulting manager and financial economist in the Valuation Services and Global Financial Services practice of KPMG Consulting, and a manager with the Economic Consulting Services practice at KPMG LLP. During his tenure at KPMG Consulting and at Decisioneering, he has advised, consulted, and applied real options analysis at multiple firms including Unilever, BP, Credit Suisse, Motorola, Intel, and El Paso Electric. He is also currently a visiting professor in finance, economics, and statistics at various universities, including University of Applied Sciences (Germany), Swiss School of Management (Switzerland), and Golden Gate University (California). He also provides seminars and lectures on the topics of real options, simulation and risk analysis, and corporate finance.

From the Back Cover

Praise for Real Options Analysis

"This book is a must–have and must–read . . . Mun′s new book is a refreshing, cutting–edge look at a powerful new decision–making process . . . it isn′t often you can truthfully say a book breaks new ground, but [this book] has certainly done that."
–Glenn G. Kautt
President, Monitor Group, Inc. (USA)

"Many books on real options can be intimidating. Mun offers a pragmatic, reliable, and entertaining guide. Complex concepts and formulas are brilliantly interspersed with well–chosen examples and step–by–step walk–throughs from a variety of industries."
–Shota Hattori
President and CEO, Kozo Keikaku Engineering, Inc. (Japan)

"The clarity and comprehensive coverage makes it one of the best guides for all practitioners . . . coupled with state–of–the–art financial tools on CD–ROM."
–Michael Sim
Partner, Moores Rowland International (Hong Kong)

"Mun certainly has earned the reputation of being an expert on the subject . . . consultants, analysts, decision–makers and engineers will be all over this book and its software."
–Phyllis Koessler
Managing Director, Koessler and Associates (Switzerland)

"Finally, a real options analysis book that is technically sophisticated enough to be useful, and practically written so that it can actually be used. It is destined to become the handbook of real options."
–A. Tracy Gomes
President, Intellectual Property Economics, LLC (USA)

From the Inside Flap

The volatile economy has presented new challenges to the corporate decision–maker, and real options are poised to become the key management tool for today′s and tomorrow′s businesses. Real options analysis is an accurate method for estimating the value of strategic investments, and it will continue to be utilized in situations where management has flexibility in large capital budget decisions with high uncertainty.

Real Options Analysis provides you with a comprehensive overview of the real options methodology and explores the tools and techniques inherent in this method that will allow you to efficiently value strategic investments and decisions. It examines both the qualitative and quantitative aspects of real options, the methods used in valuing real options, why and when they are used, as well as the applicability of these methods in decision–making.

Real options expert Johnathan Mun will help you understand and implement real options analysis under a variety of circumstances and over a wide range of industries, from pharmaceutical, oil, and gas to manufacturing and technology. Mun first looks at the qualitative nature of real options and provides actual business cases and scenarios of real options in the industry, as well as high–level explanations of how real options provide much–needed insights for decision–making. He then focuses on quantitative analysis, and reveals the power of Crystal Ball(r) software for real options analysis through the book′s companion CD–ROM. This CD–ROM demonstrates a set of sixty–nine models in the Real Options Analysis toolkit software, Crystal Ball(r) Monte Carlo simulation software, and a series of example options analysis spreadsheets that will allow you to perform real options analysis like never before.

From the basics of expansion and switching options to advanced options problems such as valuing timing options calculated with stochastic optimization, Real Options Analysis is a complete and accessible guide to the uses of real options in the decision–making process. Through expert advice, in–depth case studies, mathematical formulae, real–world scenarios, real options software, and end–of–chapter questions, Real Options Analysis provides serious insights into the understanding and application of real options when valuing strategic investments and decisions.

Edition details

• Publisher: John Wiley & Sons
• Publication date: 2002
• Language: English
• ISBN 10: 047125696X
• ISBN 13: 9780471256960
• Binding: Hardcover
• Number of pages: 416