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Sample records for real options valuation

  1. Application of Real Options Valuation to R&D Investments in Pharmaceutical Companies

    OpenAIRE

    Zhang, Huan Ran

    2006-01-01

    This paper provides an insight into the application of real option valuation method to R&D projects in pharmaceutical companies. As one of the most important corporate finance decision-making methods, real option valuation method has been introduced in the last two decades. By applying option valuation methods, real option valuation is a useful tool to company managers. R&D investments in pharmaceutical companies are subject to considerable uncertainty, which may involve possibilities (i...

  2. Real options valuation of fusion energy R and D programme

    International Nuclear Information System (INIS)

    Bednyagin, Denis; Gnansounou, Edgard

    2011-01-01

    This paper aims to perform a real options valuation of fusion energy R and D programme. Strategic value of thermonuclear fusion technology is estimated here based on the expected cash flows from construction and operation of fusion power plants and the real options value arising due to managerial flexibility and the underlying uncertainty. First, a basic investment option model of Black-Scholes type is being considered. Then, a fuzzy compound real R and D option model is elaborated, which reflects in a better way the multi-stage nature of the programme and takes into account the imprecision of information as one of the components of the overall programme uncertainty. Two different strategies are compared: 'Baseline' corresponding to a relatively moderate pace of fusion research, development, demonstration and deployment activities vs. 'Accelerated' strategy, which assumes a rapid demonstration and massive deployment of fusion. The conclusions are drawn from the model calculations regarding the strategic value of fusion energy R and D and the advantages of accelerated development path. - Research highlights: → Real options analysis of fusion R and D, demonstration and deployment (RDDD) programme. → ENPV of fusion RDDD programme is calculated using stochastic probabilistic simulation. → Fusion RDDD programme exhibits substantial positive real options value: Euro 245 billion. → Fuzzy compound real option valuation method provides more robust results.

  3. The use of fuzzy real option valuation method to rank Giga ...

    African Journals Online (AJOL)

    The use of fuzzy real option valuation method to rank Giga Investment Projects on Iran's natural gas reserves. ... Journal of Fundamental and Applied Sciences ... methodology – discounted cash flow analysis – in valuation of Giga investments.

  4. Real option valuation of power transmission investments by stochastic simulation

    International Nuclear Information System (INIS)

    Pringles, Rolando; Olsina, Fernando; Garcés, Francisco

    2015-01-01

    Network expansions in power markets usually lead to investment decisions subject to substantial irreversibility and uncertainty. Hence, investors need valuing the flexibility to change decisions as uncertainty unfolds progressively. Real option analysis is an advanced valuation technique that enables planners to take advantage of market opportunities while preventing or mitigating losses if future conditions evolve unfavorably. In the past, many approaches for valuing real options have been developed. However, applying these methods to value transmission projects is often inappropriate as revenue cash flows are path-dependent and affected by a myriad of uncertain variables. In this work, a valuation technique based on stochastic simulation and recursive dynamic programming, called Least-Square Monte Carlo, is applied to properly value the deferral option in a transmission investment. The effect of option's maturity, the initial outlay and the capital cost upon the value of the postponement option is investigated. Finally, sensitivity analysis determines optimal decision regions to execute, postpone or reject the investment projects. - Highlights: • A modern investment appraisal method is applied to value power transmission projects. • The value of the option to postpone decision to invest in transmission projects is assessed. • Simulation methods are best suited for valuing real options in transmission investments

  5. Real options and asset valuation in competitive energy markets

    Science.gov (United States)

    Oduntan, Adekunle Richard

    The focus of this work is to develop a robust valuation framework for physical power assets operating in competitive markets such as peaking or mid-merit thermal power plants and baseload power plants. The goal is to develop a modeling framework that can be adapted to different energy assets with different types of operating flexibilities and technical constraints and which can be employed for various purposes such as capital budgeting, business planning, risk management and strategic bidding planning among others. The valuation framework must also be able to capture the reality of power market rules and opportunities, as well as technical constraints of different assets. The modeling framework developed conceptualizes operating flexibilities of power assets as "switching options' whereby the asset operator decides at every decision point whether to switch from one operating mode to another mutually exclusive mode, within the limits of the equipment constraints of the asset. As a current decision to switch operating modes may affect future operating flexibilities of the asset and hence cash flows, a dynamic optimization framework is employed. The developed framework accounts for the uncertain nature of key value drivers by representing them with appropriate stochastic processes. Specifically, the framework developed conceptualizes the operation of a power asset as a multi-stage decision making problem where the operator has to make a decision at every stage to alter operating mode given currently available information about key value drivers. The problem is then solved dynamically by decomposing it into a series of two-stage sub-problems according to Bellman's optimality principle. The solution algorithm employed is the Least Squares Monte Carlo (LSM) method. The developed valuation framework was adapted for a gas-fired thermal power plant, a peaking hydroelectric power plant and a baseload power plant. This work built on previously published real options valuation

  6. Valuation: From The Discounted Cash Flows (DCF Approach To The Real Options Approach (ROA Valuation: From The Discounted Cash Flows (DCF Approach To The Real Options Approach (ROA

    Directory of Open Access Journals (Sweden)

    Cecilia Maya Ochoa

    2004-12-01

    Full Text Available There exists an abysm between market prices and traditional valuation approaches such as Discounted Cash Flows (DCF, a fact that neither academics nor practitioners could continue ignoring. Recently, a complementary approach has taken a foothold into the valuation world. Building on the DCF approach yet going further in the sense of incorporating flexibility in management investment decisions, and taking advantage of the advances in option pricing theory, the real options approach (ROA has become the alternative to capital budgeting and, lately, to corporate valuation. Empirical evidence shows that ROA explains actual prices better than DCF approaches and nowadays there is no question that from a theoretical point of view, ROA is a much more appealing concept than passive NPV. However, its acceptance by practitioners has been very slow due to the complexity of real options pricing.Existe un abismo entre precios de Mercado y la valoración estimada por métodos tradicionales tales como Flujos de Caja Descontados, un hecho que ni académicos ni practicantes pueden continuar ignorando. Recientemente, una metodología complementaria ha tomado gran fuerza. Partiendo de los Flujos de Caja Descontados, pero incorporando flexibilidad en las decisiones de inversión y aprovechando los avances en la teoría de valoración de opciones, el enfoque de opciones reales (ROA se ha convertido en la alternativa para presupuestación de capital y valoración de empresas. La evidencia empírica muestra que ROA explica los precios de mercado mejor que los enfoques basados en flujos de caja descontados y, hoy en día, no hay discusión de que es más atractivo desde un punto de vista teórico; sin embargo, su utilización en la práctica ha sido muy limitada debido a las dificultades que presenta la valoración de las opciones reales.

  7. Real options valuation and optimization of energy assets

    Science.gov (United States)

    Thompson, Matthew

    In this thesis we present algorithms for the valuation and optimal operation of natural gas storage facilities, hydro-electric power plants and thermal power generators in competitive markets. Real options theory is used to derive nonlinear partial-integro-differential equations (PIDEs) for the valuation and optimal operating strategies of all types of facilities. The equations are designed to incorporate a wide class of spot price models that can exhibit the same time-dependent, mean-reverting dynamics and price spikes as those observed in most energy markets. Particular attention is paid to the operational characteristics of real energy assets. For natural gas storage facilities these characteristics include: working gas capacities, variable deliverability and injection rates and cycling limitations. For thermal power plants relevant operational characteristics include variable start-up times and costs, control response time lags, minimum generating levels, nonlinear output functions, structural limitations on ramp rates, and minimum up/down time restrictions. For hydro-electric units, head effects and environmental constraints are addressed. We illustrate the models with numerical examples of a gas storage facility, a hydro-electric pump storage facility and a thermal power plant. This PIDE framework is the first in the literature to achieve second order accuracy in characterizing the operating states of hydro-electric and hydro-thermal power plants. The continuous state space representation derived in this thesis can therefore achieve far greater realism in terms of operating state specification than any other method in the literature to date. This thesis is also the first and only to allow for any continuous time jump diffusion processes in order to account for price spikes.

  8. ARC-VM: An architecture real options complexity-based valuation methodology for military systems-of-systems acquisitions

    Science.gov (United States)

    Domercant, Jean Charles

    The combination of today's national security environment and mandated acquisition policies makes it necessary for military systems to interoperate with each other to greater degrees. This growing interdependency results in complex Systems-of-Systems (SoS) that only continue to grow in complexity to meet evolving capability needs. Thus, timely and affordable acquisition becomes more difficult, especially in the face of mounting budgetary pressures. To counter this, architecting principles must be applied to SoS design. The research objective is to develop an Architecture Real Options Complexity-Based Valuation Methodology (ARC-VM) suitable for acquisition-level decision making, where there is a stated desire for more informed tradeoffs between cost, schedule, and performance during the early phases of design. First, a framework is introduced to measure architecture complexity as it directly relates to military SoS. Development of the framework draws upon a diverse set of disciplines, including Complexity Science, software architecting, measurement theory, and utility theory. Next, a Real Options based valuation strategy is developed using techniques established for financial stock options that have recently been adapted for use in business and engineering decisions. The derived complexity measure provides architects with an objective measure of complexity that focuses on relevant complex system attributes. These attributes are related to the organization and distribution of SoS functionality and the sharing and processing of resources. The use of Real Options provides the necessary conceptual and visual framework to quantifiably and traceably combine measured architecture complexity, time-valued performance levels, as well as programmatic risks and uncertainties. An example suppression of enemy air defenses (SEAD) capability demonstrates the development and usefulness of the resulting architecture complexity & Real Options based valuation methodology. Different

  9. Research into real-option evaluation method

    International Nuclear Information System (INIS)

    Shiba, Tsuyoshi; Wakamatsu, Hitoshi

    2002-03-01

    As an evaluational method for valuation of a corporation, an investment project, a research and development, or the evaluation technique of an enterprise strategy, a real option analysis attracts attention instead of conventional Discount Cash Flow method. The reason is that it can divert the technique for the option valuation in financial engineering to the decision-making process performed according to change in investment environment. Related references, the analysis tools, the application examples, etc. were investigated about the decision-making technique using real option analysis, and this investigation considered the application method to decision-making of the research and development at Japan Nuclear Cycle Development Institute. Consequently, since the feature is in real option analysis being the evaluation technique on condition of that business conditions and business itself also change, the real option analysis fits for evaluation of a research and development that business conditions were opaque and it turns out that the businesses are highly flexible. Moreover, it turns out that it fits also for evaluation of a capital concentration type investment issue like power plants. (author)

  10. THE VALUATION OF INITIAL SHARE PRICE USING THE FREE CASH FLOW TO FIRM METHOD AND THE REAL OPTION METHOD IN INDONESIA STOCK EXCHANGE

    Directory of Open Access Journals (Sweden)

    Adhy Listya Paramitha

    2014-01-01

    Full Text Available The purposes of this study were to determine fair share value, to analyze the factors that influence undervalue and overvalue, and to determine the best valuation method. This study made valuation using real options method and free cash flow to firm method. The results of partial logistic regression on Free Cash Flow to Firm showed that tenor variable and equity variable had positive and significant effects, while dummy variable had a negative and significant effect. In the real option model, tenor variable and implied volatility variable had positive and significant effects, while sheets of share variable had a negative and significant effect

  11. Probabilistic Cash Flow-Based Optimal Investment Timing Using Two-Color Rainbow Options Valuation for Economic Sustainability Appraisement

    Directory of Open Access Journals (Sweden)

    Yonggu Kim

    2017-10-01

    Full Text Available This research determines the optimal investment timing using real options valuation to support decision-making for economic sustainability assessment. This paper illustrates an option pricing model using the Black-Scholes model applied to a case project to understand the model performance. Applicability of the project to the model requires two Monte Carlo simulations to satisfy a Markov process and a Wiener process. The position of project developers is not only the seller of products, but it is also the buyer of raw materials. Real options valuation can be influenced by the volatility of cash outflow, as well as the volatility of cash inflow. This study suggests two-color rainbow options valuation to overcome this issue, which is demonstrated for a steel plant project. The asymmetric results of the case study show that cash outflow (put option influences the value of the steel plant project more than cash inflow (call option does of which the discussion of the results is referred to a sensitivity analysis. The real options valuation method proposed in this study contributes to the literature on applying the new model, taking into consideration that investors maximize project profitability for economic sustainable development.

  12. EL MÉTODO DE DIFERENCIAS FINITAS EN EVALUACIÓN DE OPCIONES REALES THE FINITE DIFFERENCE METHOD IN REAL OPTIONS VALUATION

    Directory of Open Access Journals (Sweden)

    Sebastián Otero G

    2008-06-01

    representa su capacidad de incorporar en el análisis el valor de la flexibilidad operativa del proyecto.In the past few years, real options, an extension of financial derivatives, have arisen as an alternative to traditional valuation methods, such as net present value (NPV. The key attribute of real options is that they take into consideration the uncertainty and flexibility involved in investment valuation. This article provides an overview of the finite difference method, by presenting an application to the real options valuation. The empirical section of the article, which makes use of the implicit finite difference method (IFD, analyzes the options of waiting, abandoning, contracting, expanding and switching, by valuing all the options involved and their possible combinations. The results are compared with those of the NPV method and the binomial tree with a logarithmic transformation (BTLT. Both methods (IFD and BTLT yield similar results, being both greater than those provided by the NPV. This difference comes to no surprise as it represents the value of the flexibility associated to an investment opportunity.

  13. Valuation of Wind Energy Projects: A Real Options Approach

    Directory of Open Access Journals (Sweden)

    Luis M. Abadie

    2014-05-01

    Full Text Available We address the valuation of an operating wind farm and the finite-lived option to invest in it under different reward/support schemes: a constant feed-in tariff, a premium on top of the electricity market price (either a fixed premium or a variable subsidy such as a renewable obligation certificate or ROC, and a transitory subsidy, among others. Futures contracts on electricity with ever longer maturities enable market-based valuations to be undertaken. The model considers up to three sources of uncertainty: the electricity price, the level of wind generation, and the certificate (ROC price where appropriate. When analytical solutions are lacking, we resort to a trinomial lattice combined with Monte Carlo simulation; we also use a two-dimensional binomial lattice when uncertainty in the ROC price is considered. Our data set refers to the UK. The numerical results show the impact of several factors involved in the decision to invest: the subsidy per MWh generated, the initial lump-sum subsidy, the maturity of the investment option, and electricity price volatility. Different combinations of variables can help bring forward investments in wind generation. One-off policies, e.g., a transitory initial subsidy, seem to have a stronger effect than a fixed premium per MWh produced.

  14. Flexibility and Project Value: Interactions and Multiple Real Options

    Science.gov (United States)

    Čulík, Miroslav

    2010-06-01

    This paper is focused on a project valuation with embedded portfolio of real options including their interactions. Valuation is based on the criterion of Net Present Value on the simulation basis. Portfolio includes selected types of European-type real options: option to expand, contract, abandon and temporarily shut down and restart a project. Due to the fact, that in reality most of the managerial flexibility takes the form of portfolio of real options, selected types of options are valued not only individually, but also in combination. The paper is structured as follows: first, diffusion models for forecasting of output prices and variable costs are derived. Second, project value is estimated on the assumption, that no real options are present. Next, project value is calculated with the presence of selected European-type options; these options and their impact on project value are valued first in isolation and consequently in different combinations. Moreover, intrinsic value evolution of given real options with respect to the time of exercising is analysed. In the end, results are presented graphically; selected statistics and risk measures (Value at Risk, Expected Shortfall) of the NPV's distributions are calculated and commented.

  15. Option valuation for energy issues

    International Nuclear Information System (INIS)

    Ostertag, K.; Llerena, P.; Richard, A.

    2004-01-01

    In many industrial and economic situations, decision processes, both individual and collective, have to simultaneously face uncertainty and irreversibility of some kind. This is particularly valid for energy choices if they are linked to technological alternatives. The purpose of this book is to highlight specific aspects of these situations. This is done from the particular perspective of option valuation. The contributions to this book grew out of an international workshop on ''Option valuation in energy and environmental issues'' held at the Fraunhofer ISI in February 2003. This workshop brought together reseachers from energy economics, but also researchers working on option valuation in other empirical fields or with a more theoretical perspective. This is reflected in the organisation of the book, which starts with some theory-oriented contributions and subsequently presents more applied contributions in the field of energy economics with an extension to water infrastructure in the annex. (orig.)

  16. Stochastic control and real options valuation of thermal storage-enabled demand response from flexible district energy systems

    International Nuclear Information System (INIS)

    Kitapbayev, Yerkin; Moriarty, John; Mancarella, Pierluigi

    2015-01-01

    Highlights: • We calculate the real option value of flexibility from CHP-thermal storage. • Stochastic optimal feedback control problem is solved under uncertain market prices. • Efficient real-time numerical solutions combine simulation, regression and recursion. • Clear, interpretable feedback control maps are produced for each hour of the day. • We give a realistic UK case study using projected market gas and electricity prices. - Abstract: In district energy systems powered by Combined Heat and Power (CHP) plants, thermal storage can significantly increase CHP flexibility to respond to real time market signals and therefore improve the business case of such demand response schemes in a Smart Grid environment. However, main challenges remain as to what is the optimal way to control inter-temporal storage operation in the presence of uncertain market prices, and then how to value the investment into storage as flexibility enabler. In this outlook, the aim of this paper is to propose a model for optimal and dynamic control and long term valuation of CHP-thermal storage in the presence of uncertain market prices. The proposed model is formulated as a stochastic control problem and numerically solved through Least Squares Monte Carlo regression analysis, with integrated investment and operational timescale analysis equivalent to real options valuation models encountered in finance. Outputs are represented by clear and interpretable feedback control strategy maps for each hour of the day, thus suitable for real time demand response under uncertainty. Numerical applications to a realistic UK case study with projected market gas and electricity prices exemplify the proposed approach and quantify the robustness of the selected storage solutions

  17. Application of Binomial Model and Market Asset Declaimer Methodology for Valuation of Abandon and Expand Options. The Case Study

    Directory of Open Access Journals (Sweden)

    Paweł Mielcarz

    2007-06-01

    Full Text Available The article presents a case study of valuation of real options included in a investment project. The main goal of the article is to present the calculation and methodological issues of application the methodology for real option valuation. In order to do it there are used the binomial model and Market Asset Declaimer methodology. The project presented in the article concerns the introduction of radio station to a new market. It includes two valuable real options: to abandon the project and to expand.

  18. Giga-Investments: Modelling the Valuation of Very Large Industrial Real Investments

    OpenAIRE

    Collan, Mikael

    2004-01-01

    In this doctoral dissertation characteristics of very large industrial real investments (VLIRI) are investigated and a special group of VLIRI is defined as giga-investments. The investment decision-making regarding to giga-investments is discussed from the points of view of discounted cash-flow based methods and real option valuation. Based on the bacground of establishing giga-investments, state-of-the-art in capital budgeting (including real options) and by applying fuzzy numbers a novel me...

  19. Retrospective insights from real options in R&D

    NARCIS (Netherlands)

    Lint, L.J.O.

    2000-01-01

    Absent empirical validation of real option pricing in R&D, we discuss the evolution of three cases in R&D option valuation. The first case concerns an option on conversion of an existing production process. The other two cases concern R&D to develop new product technology in the consumer electronics

  20. Flexibility valuation in the Brazilian power system: A real options approach

    International Nuclear Information System (INIS)

    Marreco, Juliana de Moraes; Carpio, Lucio Guido Tapia

    2006-01-01

    This paper presents a valuation study of operational flexibility in the complex Brazilian Power System. Thermopower plants represent operational flexibility for the national system operator provided they can be dispatched in dry periods to supply part of the load when reservoir waters are too low. Deficit costs can be avoided as a result. We have adopted a real options approach to calculate the fair value of a financial subsidy to be paid to thermal generators for their availability to the system. A financial subsidy is mandatory for their economic feasibility and, therefore, for increased thermopower capacity in the Brazilian Power System. This is why this policy is currently being studied by Brazil's federal government. In order to illustrate our modeling we have run the model for the southeast subsystem. We found a flexibility value of US$4.52 billion, which represents US$497/MW per year. This means that a 100 MW thermopower plant should receive US$49,700 for each year of its economic lifetime as a fair premium incentive to investments

  1. Real Options in Capital Budgeting. Pricing the Option to Delay and the Option to Abandon a Project

    Directory of Open Access Journals (Sweden)

    Nicoleta Vintila

    2007-07-01

    Full Text Available Traditional discounted cash-flows method for assessing projects assumes that investment decision is an irreversible one, which is not correct. Managers can and must reconsider their initial decision as the new information arises during the project life. This is managerial flexibility and it creates strategic value for a project, only if management takes advantage of the opportunities associated with an analyzed project. Real options represent a new approach in capital budgeting, using the theory of pricing financial options for investments in real assets. In this paper, we emphasize the characteristics and valuation methodologies of real options. The objective in the last section is pricing the option to delay and the option to abandon a project in construction materials field.

  2. Valuating Privacy with Option Pricing Theory

    Science.gov (United States)

    Berthold, Stefan; Böhme, Rainer

    One of the key challenges in the information society is responsible handling of personal data. An often-cited reason why people fail to make rational decisions regarding their own informational privacy is the high uncertainty about future consequences of information disclosures today. This chapter builds an analogy to financial options and draws on principles of option pricing to account for this uncertainty in the valuation of privacy. For this purpose, the development of a data subject's personal attributes over time and the development of the attribute distribution in the population are modeled as two stochastic processes, which fit into the Binomial Option Pricing Model (BOPM). Possible applications of such valuation methods to guide decision support in future privacy-enhancing technologies (PETs) are sketched.

  3. The Implications of Real Options on ERP-Enabled Adoption

    Science.gov (United States)

    Nwankpa, Joseph K.

    2012-01-01

    Current research on Enterprise Resource Planning (ERP) systems and real options focuses on valuation and justification issues that manager's face prior to project approval with existing literature attempting to demonstrate that ERP systems as technology positioning investments have option-like characteristics thus making such ERP systems…

  4. Real Option in Capital Budgeting for SMEs: Insight from Steel Company

    Science.gov (United States)

    Muharam, F. M.; Tarrazon, M. A.

    2017-06-01

    Complex components of investment projects can only be analysed accurately if flexibility and comprehensive consideration of uncertainty are incorporated into valuation. Discounted cash flow (DCF) analysis has failed to cope with strategic future alternatives that affect the right value of investment projects. Real option valuation (ROV) proves to be the right tool for this purpose since it enables to calculate the enlarged or strategic Net Present Value (ENPV). This study attempts to provide an insight of the usage of ROV in capital budgeting and investment decision-making processes of SMEs. Exploring into the first stage processing of steel industry, analysis of alternatives to cancel, to expand, to defer or to abandon is performed. Completed with multiple options interaction and a sensitivity analysis, our findings prove that the application of ROV is beneficial for complex investment projects independently from the size of the company and particularly suitable in scenarios with scarce resources. The application of Real Option Valuation (ROV) is plausible and beneficial for SMEs to be incorporated in the strategic decision making process.

  5. Enfoque de opciones reales para la valoración financiera de marcas Real Options Approach to Financial Valuation of Brands

    Directory of Open Access Journals (Sweden)

    Yessica González Londoño

    2012-12-01

    Full Text Available Los activos intangibles, especialmente las marcas, son parte fundamental del valor de mercado de las compañías, pues representan su ventaja competitiva; sin embargo, la Contabilidad y las Finanzas se enfrentan ante un reto difícil al momento de valorarlos. Los métodos de medición de intangibles en la literatura revisada se caracterizan por ser limitados y subjetivos, e incluso presentan algunos errores conceptuales, encontrándose su utilidad principal en el campo de la gestión. Este artículo propone una metodología para la valoración financiera de marcas a partir de una extensión de la aplicación de opciones reales compuestas de las patentes, aprovechando las similitudes en su construcción. Su aplicación se ilustra mediante la valoración de la marca de una compañía aseguradora.Intangible assets are an important component of the market value of a company, particularly in brands which represent the competitive advantage of the company; however, both Accounting and Finance face a great challenge when trying to value them. The methods which have been proposed by the literature appear to be subjective, limited, and based on some theoretical errors. Their use is mainly circumscribed to the management of intangibles. This paper proposes a methodology for the financial valuation of brands based on the application of a compound real option model to a patent valuation, acknowledging the similarities in their construction. Later, an application to an insurance company is presented.

  6. Real option valuation of free destination in long-term liquefied natural gas supplies

    International Nuclear Information System (INIS)

    Yepes Rodriguez, Ramon

    2008-01-01

    This paper presents a real option model for the valuation of destination flexibility in long-term LNG supplies. Stochastic price dynamics in the different markets is modelled through geometric Brownian motion processes. Mean reversion is considered as well as correlation between markets, but instead of the usual correlation in return shocks, a price convergence term is introduced representing the arbitrage streams between markets. Model parameters are estimated from market data on LNG prices by maximum log-likelihood. The goodness of the fit for the proposed model is tested as well as for two alternative models. Confidence intervals for the parameters are given. Results for the model are calculated by Monte Carlo simulation. Frequency distributions for the main results are plotted. The effect of the main parameters of the model is studied (i.e. price volatilities, price convergence, initial prices in the markets, mean reversion, extra transportation costs, number of alternative markets). The value of destination flexibility is found to be an important share of the value of LNG

  7. The pitfalls of capital budgeting : when costs correlate to oil price. Is the real-options approach superior to traditional valuation?

    Energy Technology Data Exchange (ETDEWEB)

    Schiozer, R.F. [Getulio Vargas Foundation, Sao Paolo (Brazil). School of Administration de Empresas; Costa Lima, G.A.; Suslick, S.B. [Unicamp, Campinas (Brazil). Center of Petroleum Studies

    2007-07-01

    Due to increased demand for drilling rigs, specialized labor force and other resources, the costs of exploration, appraisal, development and production have significantly risen over the last five years. The change in costs has mostly been attributed to the increased activity in the oil and gas exploration and production (EP) industry, as a result of the increase in oil prices. It was hypothesized that operating costs in the EP industry were strongly correlated to the price of oil. However, the correlation between prices and costs has traditionally been overlooked in the capital budgeting process. This paper investigated the economic relationship between oil price and the operating costs in the EP industry. It also explored its implications for the capital budgeting process and decision-making. The paper demonstrated the evaluation of projects under traditional net present value (NPV) and real-option approaches. Empirical evidence was also provided on how costs correlated to oil prices. The differences between project valuation when cost-price correlation was taken into account or not was also discussed. Last, findings, conclusions and general implications of the results obtained for the decision-making process were identified. It was concluded that there was a positive correlation between price and operating costs, and that overlooking this relationship would have significant implications on the valuation of investment projects, both using a traditional NPV methodology, which resulted in undervalued projects, and under real option analysis, which resulted in overvaluing projects. 6 refs., 2 tabs., 5 figs.

  8. The pitfalls of capital budgeting : when costs correlate to oil price. Is the real-options approach superior to traditional valuation?

    International Nuclear Information System (INIS)

    Schiozer, R.F.; Costa Lima, G.A.; Suslick, S.B.

    2007-01-01

    Due to increased demand for drilling rigs, specialized labor force and other resources, the costs of exploration, appraisal, development and production have significantly risen over the last five years. The change in costs has mostly been attributed to the increased activity in the oil and gas exploration and production (EP) industry, as a result of the increase in oil prices. It was hypothesized that operating costs in the EP industry were strongly correlated to the price of oil. However, the correlation between prices and costs has traditionally been overlooked in the capital budgeting process. This paper investigated the economic relationship between oil price and the operating costs in the EP industry. It also explored its implications for the capital budgeting process and decision-making. The paper demonstrated the evaluation of projects under traditional net present value (NPV) and real-option approaches. Empirical evidence was also provided on how costs correlated to oil prices. The differences between project valuation when cost-price correlation was taken into account or not was also discussed. Last, findings, conclusions and general implications of the results obtained for the decision-making process were identified. It was concluded that there was a positive correlation between price and operating costs, and that overlooking this relationship would have significant implications on the valuation of investment projects, both using a traditional NPV methodology, which resulted in undervalued projects, and under real option analysis, which resulted in overvaluing projects. 6 refs., 2 tabs., 5 figs

  9. Use of Multicriteria Valuation of Spatial Units in a System of Mass Real Estate Valuation

    Directory of Open Access Journals (Sweden)

    Miroslav Kuburić

    2012-05-01

    Full Text Available A model of mass valuation at the national level must be functional, practically applicable, consistent and adaptable to actual conditions and real estate market trends. A consideration of the influence of location on real estate value in a spatial unit, and a description of spatial units with a sufficient number of attributes to determine a connection between the value of these attributes and the average price of real estate in a spatial unit, are important tasks in modelling a system of mass real estate valuation. This paper, based on a test implementation of mass real estate valuation for an area covering a number of municipalities in the Republic of Serbia, offers conclusions on the suitability of the use of a mass valuation method grounded in the principles of logical aggregation and case based reasoning. The values of location characteristics, or factors of spatial unit valuation, were determined in spatial analyses employing GIS, according to an established system of multicriteria valuation. This approach ensures that a model-defined value is not stored as offline data, but that each time such data is needed, it can be determined following the proposed methodology, based on actual, updated data from the databases of official spatial data registries. Prior to this, it is necessary to meet all the required prerequisites, which include the distributed databases of official real estate data registries and other factors needed in the mass valuation procedure. Keywords: real estate valuation; spatial units; multicriteria analysis

  10. The Fundamental Uncertainty of Business: Real Options

    Science.gov (United States)

    Dyer, James S.

    The purpose of this paper is to discuss the manner in which uncertainty is currently evaluated in business, with an emphasis on economic measures. In recent years, the accepted approach for the valuation of capital investment decisions has become one based on the theory of real options. From the standpoint of this workshop, the interesting aspect of real options is its focus on the flexibility of management to respond to changes in the environment as a feature of an alternative that has unique value, known as "option value." While this may not be surprising to most participants in this workshop, it does represent a radical change in traditional thinking about risk in business, where efforts have primarily been focused on the elimination of risk when possible.

  11. Evaluation of Cloud Computing Hidden Benefits by Using Real Options Analysis

    Directory of Open Access Journals (Sweden)

    Pavel Náplava

    2016-12-01

    Full Text Available Cloud computing technologies have brought new attributes to the IT world. One of them is a flexibility of IT resources. It enables effectively both to downsize and upsize the capacity of IT resources in real time. Requirements for IT size change defines business strategy and actual market state. IT costs are not stable but dynamic in this case. Standard investment valuation methods (both static and dynamic are not able to include the flexibility attribute to the evaluation of IT projects. This article describes the application of the Real Options Analysis method for the valuation of the cloud computing flexibility. The method compares costs of the on-premise and cloud computing solutions by combining put and call option valuation. Cloud computing providers can use the method as an advanced tool that explains hidden benefits of cloud computing. Unexperienced cloud computing customers can simulate the market behavior and better plan necessary IT investments.

  12. Supply chain management and economic valuation of real options in the natural gas and liquefied natural gas industry

    Science.gov (United States)

    Wang, Mulan Xiaofeng

    My dissertation concentrates on several aspects of supply chain management and economic valuation of real options in the natural gas and liquefied natural gas (LNG) industry, including gas pipeline transportations, ocean LNG shipping logistics, and downstream storage. Chapter 1 briefly introduces the natural gas and LNG industries, and the topics studied in this thesis. Chapter 2 studies how to value U.S. natural gas pipeline network transport contracts as real options. It is common for natural gas shippers to value and manage contracts by simple adaptations of financial spread option formulas that do not fully account for the implications of the capacity limits and the network structure that distinguish these contracts. In contrast, we show that these operational features can be fully captured and integrated with financial considerations in a fairly easy and managerially significant manner by a model that combines linear programming and simulation. We derive pathwise estimators for the so called deltas and structurally characterize them. We interpret them in a novel fashion as discounted expectations, under a specific weighing distribution, of the amounts of natural gas to be procured/marketed when optimally using pipeline capacity. Based on the actual prices of traded natural gas futures and basis swaps, we show that an enhanced version of the common approach employed in practice can significantly underestimate the true value of natural gas pipeline network capacity. Our model also exhibits promising financial (delta) hedging performance. Thus, this model emerges as an easy to use and useful tool that natural gas shippers can employ to support their valuation and delta hedging decisions concerning natural gas pipeline network transport capacity contracts. Moreover, the insights that follow from our data analysis have broader significance and implications in terms of the management of real options beyond our specific application. Motivated by current developments

  13. Option Valuation with Observable Volatility and Jump Dynamics

    DEFF Research Database (Denmark)

    Christoffersen, Peter; Feunoua, Bruno; Jeon, Yoontae

    Under very general conditions, the total quadratic variation of a jump-diffusion process can be decomposed into diffusive volatility and squared jump variation. We use this result to develop a new option valuation model in which the underlying asset price exhibits volatility and jump intensity...... dynamics. The volatility and jump intensity dynamics in the model are directly driven by model-free empirical measures of diffusive volatility and jump variation. Because the empirical measures are observed in discrete intervals, our option valuation model is cast in discrete time, allowing...

  14. Option Valuation with Observable Volatility and Jump Dynamics

    DEFF Research Database (Denmark)

    Christoffersen, Peter; Feunoua, Bruno; Jeon, Yoontae

    2015-01-01

    Under very general conditions, the total quadratic variation of a jump-diffusion process can be decomposed into diffusive volatility and squared jump variation. We use this result to develop a new option valuation model in which the underlying asset price exhibits volatility and jump intensity...... dynamics. The volatility and jump intensity dynamics in the model are directly driven by model-free empirical measures of diffusive volatility and jump variation. Because the empirical measures are observed in discrete intervals, our option valuation model is cast in discrete time, allowing...

  15. Option Valuation with Observable Volatility and Jump Dynamics

    DEFF Research Database (Denmark)

    Christoffersen, Peter; Feunou, Bruno; Jeon, Yoontae

    Under very general conditions, the total quadratic variation of a jump-diffusion process can be decomposed into diffusive volatility and squared jump variation. We use this result to develop a new option valuation model in which the underlying asset price exhibits volatility and jump intensity...... dynamics. The volatility and jump intensity dynamics in the model are directly driven by model-free empirical measures of diffusive volatility and jump variation. Because the empirical measures are observed in discrete intervals, our option valuation model is cast in discrete time, allowing...... for straightforward filtering and estimation of the model. Our model belongs to the affine class enabling us to derive the conditional characteristic function so that option values can be computed rapidly without simulation. When estimated on S&P500 index options and returns the new model performs well compared...

  16. Real options methodology in public-private partnership projects valuation

    Directory of Open Access Journals (Sweden)

    Rakić Biljana

    2014-01-01

    Full Text Available PPP offers numerous benefits to both public and private partners in delivery of infrastructure projects. However this partnership also involves great risks which have to be adequately managed and mitigated. Private partners are especially sensitive to revenue risk, since they are mostly interested in the financial viability of the project. Thus they often expect public partners to provide some kind of risk-sharing mechanism in the form of Minimum Revenue Guarantees or abandonment options. The objective of this paper is to investigate whether the real option of abandoning the project increases its value. Therefore the binominal option pricing model and risk-neutral probability approach have been implemented to price the European and American abandonment options for the Build-Operate-Transfer (BOT toll road investment. The obtained results suggest that the project value with the American abandonment option is greater than with the European abandonment option, hence implying that American options offer greater flexibility and are more valuable for private partners. [Projekat Ministarstva nauke Republike Srbije, br. 179066 and III 42006

  17. Option valuation with the simplified component GARCH model

    DEFF Research Database (Denmark)

    Dziubinski, Matt P.

    We introduce the Simplified Component GARCH (SC-GARCH) option pricing model, show and discuss sufficient conditions for non-negativity of the conditional variance, apply it to low-frequency and high-frequency financial data, and consider the option valuation, comparing the model performance...

  18. Option Valuation with Long-run and Short-run Volatility Components

    DEFF Research Database (Denmark)

    Christoffersen, Peter; Jacobs, Kris; Ornthanalai, Chayawat

    This paper presents a new model for the valuation of European options, in which the volatility of returns consists of two components. One of these components is a long-run component, and it can be modeled as fully persistent. The other component is short-run and has a zero mean. Our model can...... be viewed as an affine version of Engle and Lee (1999), allowing for easy valuation of European options. The model substantially outperforms a benchmark single-component volatility model that is well-established in the literature, and it fits options better than a model that combines conditional...... model long-maturity and short-maturity options....

  19. Pricing real estate index options under stochastic interest rates

    Science.gov (United States)

    Gong, Pu; Dai, Jun

    2017-08-01

    Real estate derivatives as new financial instruments are not merely risk management tools but also provide a novel way to gain exposure to real estate assets without buying or selling the physical assets. Although real estate derivatives market has exhibited a rapid development in recent years, the valuation challenge of real estate derivatives remains a great obstacle for further development in this market. In this paper, we derive a partial differential equation contingent on a real estate index in a stochastic interest rate environment and propose a modified finite difference method that adopts the non-uniform grids to solve this problem. Numerical results confirm the efficiency of the method and indicate that constant interest rate models lead to the mispricing of options and the effects of stochastic interest rates on option prices depend on whether the term structure of interest rates is rising or falling. Finally, we have investigated and compared the different effects of stochastic interest rates on European and American option prices.

  20. GARCH Option Valuation: Theory and Evidence

    DEFF Research Database (Denmark)

    Christoffersen, Peter; Jacobs, Kris; Ornthanalai, Chayawat

    We survey the theory and empirical evidence on GARCH option valuation models. Our treatment includes the range of functional forms available for the volatility dynamic, multifactor models, nonnormal shock distributions as well as style of pricing kernels typically used. Various strategies...... for empirical implementation are laid out and we also discuss the links between GARCH and stochastic volatility models. In the appendix we provide Matlab computer code for option pricing via Monte Carlo simulation for nonaffine models as well as Fourier inversion for affine models....

  1. Sequencing Infrastructure Investments under Deep Uncertainty Using Real Options Analysis

    Directory of Open Access Journals (Sweden)

    Nishtha Manocha

    2018-02-01

    Full Text Available The adaptation tipping point and adaptation pathway approach developed to make decisions under deep uncertainty do not shed light on which among the multiple available pathways should be chosen as the preferred pathway. This creates the need to extend these approaches by means of suitable tools that can help sequence actions and subsequently enable the outlining of relevant policies. This paper presents two sequencing approaches, namely, the “Build to Target” and “Build Up” approach, to aid in sub-selecting a set of preferred pathways. Both approaches differ in the levels of flexibility they offer. They are exemplified by means of two case studies wherein the Net Present Valuation and the Real Options Analysis are employed as selection criterions. The results demonstrate the benefit of these two approaches when used in conjunction with the adaptation pathways and show how the pathways selected by means of a Build to Target approach generally have a value greater than, or at least the same as, the pathways selected by the Build Up approach. Further, this paper also demonstrates the capacity of Real Options to quantify and capture the economic value of flexibility, which cannot be done by traditional valuation approaches such as Net Present Valuation.

  2. On a Generalized Squared Gaussian Diffusion Model for Option Valuation

    Directory of Open Access Journals (Sweden)

    Edeki S.O.

    2017-01-01

    Full Text Available In financial mathematics, option pricing models are vital tools whose usefulness cannot be overemphasized. Modern approaches and modelling of financial derivatives are therefore required in option pricing and valuation settings. In this paper, we derive via the application of Ito lemma, a pricing model referred to as Generalized Squared Gaussian Diffusion Model (GSGDM for option pricing and valuation. Same approach can be considered via Stratonovich stochastic dynamics. We also show that the classical Black-Scholes, and the square root constant elasticity of variance models are special cases of the GSGDM. In addition, general solution of the GSGDM is obtained using modified variational iterative method (MVIM.

  3. Identification of the real options in a program of nuclear plants

    International Nuclear Information System (INIS)

    Camacho G, D.; Diaz N, M. J.; Reinking C, A.

    2008-01-01

    The development of our societies and our economies this intimately related to electric power and this as well with the generating sources, due to the projection of world-wide growth should go associate with a strategy of growth of energy generation. Considering to the nuclear power as an option to satisfy the energy needs that a country can provide two main immediate benefits: The stabilization of prices of security of provision of electric power of the nation. The care of the environment, since the gas discharges greenhouse are almost null. At the moment nuclear energy represents economically a viable option for the capital investment, taking into account the development from technology, the policies implemented by the state and the prices of other fuels. Due to the great investment that its require for the nuclear plants are necessary to use financial tools that allow to analyze the future scenes in which ours investment can be seen affected and to value the flexibility of being able to enlarge, to postpone or to stop our project in order to have majors profits or to diminish the lost ones. This valuation of the flexibility can be obtained from the called method Real Options. By analysis of Real Options the process is understood to apply to the methodology of the Financial Options to the valuation of projects or the management of real assets. The Real Options appear in flexible plans, projects, activities or enterprise investments, like for example, to leave or to sell the investment project before concluding it, changing to their use or its technology, to prolong their life, the option to choose, one or the other capacity, among others possibilities. In this work is an example of the application of the method of Real Options in the decision to invest or to defer the investment for the construction of a nuclear plant following the behavior of the tariffs in the market or the costs of generation of other technologies with which a nuclear plant competes. (Author)

  4. A real option-based model to valuate CDM projects under uncertain energy policies for emission trading

    International Nuclear Information System (INIS)

    Park, Taeil; Kim, Changyoon; Kim, Hyoungkwan

    2014-01-01

    Highlights: • A real option-based model for the valuation of CDM projects is proposed. • This study investigates the impact of energy policies on the value of CDM projects. • Level of target emission and its schedule should be carefully designed. • Government subsidy facilitates the implementation of CDM projects. • Period for free emission allowance prevents promoting CDM projects. - Abstract: Emission trading has been considered a primary policy tool for emission reduction. Governments establish national targets for emission reduction and assign emission reduction goals to private entities to accomplish the targets. To attain the goal, private entities should perform offset projects that can produce emission credits or buy emission credits from the market. However, it is not easy for private entities to decide to implement the projects because energy policies associated with emission trading keep changing; thus, the future benefits of the offset projects are quite uncertain. This study presents a real option-based model to investigate how uncertain energy policies affect the financial viability of an offset project. A case study showed that the establishment of a target emission was attractive to the government because it could make the CDM project financially viable with a small amount of government subsidy. In addition, the level of the government subsidy could determine the investment timing for the CDM project. In this context, governments should be cautious in designing energy policies, because even the same energy policies could have different impacts on private entities. Overall, this study is expected to assist private entities in establishing proper investment strategies for CDM projects under uncertain energy policies

  5. Using real options analysis to support strategic management decisions

    Science.gov (United States)

    Kabaivanov, Stanimir; Markovska, Veneta; Milev, Mariyan

    2013-12-01

    Decision making is a complex process that requires taking into consideration multiple heterogeneous sources of uncertainty. Standard valuation and financial analysis techniques often fail to properly account for all these sources of risk as well as for all sources of additional flexibility. In this paper we explore applications of a modified binomial tree method for real options analysis (ROA) in an effort to improve decision making process. Usual cases of use of real options are analyzed with elaborate study on the applications and advantages that company management can derive from their application. A numeric results based on extending simple binomial tree approach for multiple sources of uncertainty are provided to demonstrate the improvement effects on management decisions.

  6. Growing short rotation coppice on agricultural land in Germany: A Real Options Approach

    International Nuclear Information System (INIS)

    Musshoff, Oliver

    2012-01-01

    stochastic process type underlying the valuation. ► Simulation-based valuation of real (American) options.

  7. Real Options Analysis of Electricity Investments

    Energy Technology Data Exchange (ETDEWEB)

    Heggedal, Ane Marte

    2012-07-01

    This thesis utilizes real options analysis for evaluating investment opportunities in the electricity sector. It also formally tests how investors in hydropower plants have included uncertainty when considering their investment opportunities. The real options method applies financial options theory to quantify the value of management flexibility and is chosen due to three important characteristics of investments in the electricity sector. First; the investment is completely or partially irreversible, second; the investor can choose when to invest in the facility, and third; there is uncertainty in several factors affecting the cash flows of the investments. Factors of uncertainty include the development of electricity prices, policies, technological advances, and macroeconomics measures.Four papers are included in this thesis. Paper 1, Upgrading hydropower plants with storage: Timing and capacity choice, presents a valuation framework for deciding when to upgrade an existing hydropower plant and which capacity to choose. The second paper, Transmission capacity between Norway and Germany: A real options analysis, sheds light on when two electricity markets, in this case Norway and Germany, should be connected through a sub sea cable. The investor can choose when to invest and the capacity of the cable, and may also choose to invest sequentially. Paper 3, Optimal timing and capacity choice for pumped hydropower storage, investigates when investment in a pumped hydropower plant with storage should be undertaken and what the capacity of the facility should be. Whereas the three first papers investigate investment opportunities, Paper 4, Uncertain climate policy decisions and investment timing: Evidence from small hydropower plants, studies when investors in small hydropower plants chose to invest. The analyses disclose whether the net present value approach or the real options method best describe the investment decisions made by the investors. Viewing investment

  8. Option Valuation with Conditional Heteroskedasticity and Non-Normality

    DEFF Research Database (Denmark)

    Christoffersen, Peter; Elkamhi, Redouane; Feunou, Bruno

    the option smirk. We analyze a class of equivalent martingale measures for which the resulting risk-neutral return dynamics are from the same family of distributions as the physical return dynamics. In this case, our framework nests the valuation results obtained by Duan (1995) and Heston and Nandi (2000...

  9. A novel method to value real options in health care: the case of a multicohort human papillomavirus vaccination strategy.

    Science.gov (United States)

    Favato, Giampiero; Baio, Gianluca; Capone, Alessandro; Marcellusi, Andrea; Saverio Mennini, Francesco

    2013-07-01

    A large number of economic evaluations have already confirmed the cost-effectiveness of different human papillomavirus (HPV) vaccination strategies. Standard analyses might not capture the full economic value of novel vaccination programs because the cost-effectiveness paradigm fails to take into account the value of active management. Management decisions can be seen as real options, a term used to refer to the application of option pricing theory to the valuation of investments in nonfinancial assets in which much of the value is attributable to flexibility and learning over time. The aim of this article was to discuss the potential advantages shown by using the payoff method in the valuation of the cost-effectiveness of competing HPV immunization programs. This was the first study, to the best of our knowledge, to use the payoff method to determine the real option values of 4 different HPV vaccination strategies targeting female subjects aged 12, 15, 18, and 25 years. The payoff method derives the real option value from the triangular payoff distribution of the project's net present value, which is treated as a triangular fuzzy number. To inform the real option model, cost-effectiveness data were derived from an empirically calibrated Bayesian model designed to assess the cost-effectiveness of a multicohort HPV vaccination strategy in the context of the current cervical cancer screening program in Italy. A net health benefit approach was used to calculate the expected fuzzy net present value for each of the 4 vaccination strategies evaluated. Costs per quality-adjusted life-year gained seemed to be related to the number of cohorts targeted: a single cohort of girls aged 12 years (€10,955 [95% CI, -1,021 to 28,212]) revealed the lowest cost among the 4 alternative strategies evaluated. The real option valuation challenged the cost-effectiveness dominance of a single cohort of 12-year-old girls. The simultaneous vaccination of 2 cohorts of girls aged 12 and 15

  10. A real option-based simulation model to evaluate investments in pump storage plants

    International Nuclear Information System (INIS)

    Muche, Thomas

    2009-01-01

    Investments in pump storage plants are expected to grow especially due to their ability to store an excess of supply from wind power plants. In order to evaluate these investments correctly the peculiarities of pump storage plants and the characteristics of liberalized power markets have to be considered. The main characteristics of power markets are the strong power price volatility and the occurrence of prices spikes. In this article a valuation model is developed capturing these aspects using power price simulation, optimization of unit commitment and capital market theory. This valuation model is able to value a future price-based unit commitment planning that corresponds to future scope of actions also called real options. The resulting real option value for the pump storage plant is compared with the traditional net present value approach. Because this approach is not able to evaluate scope of actions correctly it results in strongly smaller investment values and forces wrong investment decisions.

  11. Development of real options model for nuclear power plants

    International Nuclear Information System (INIS)

    Ono, Kenji

    2004-01-01

    As the Japanese electricity market is deregulated, it becomes more important for electric utilities to recognize their financial risks and to adopt strategic and scientific decision making methodology. We have developed two models for valuation of Japanese nuclear power plants to support utilities' decision making. One is a net present value (NPV) model using discounted cash flow analysis method. Another is a real options model. This model is based on strict financial technology theory and can calculate value of early retirement, life extension and new unit addition options of nuclear units under electricity price uncertainty. This can also derive an optimal period for retirement, life extension and new unit addition. (author)

  12. Valuation of exploration and production assets. An overview of real options models

    International Nuclear Information System (INIS)

    Dias, Marco Antonio Guimaraes

    2004-01-01

    This paper presents a set of selected real options models to evaluate investments in petroleum exploration and production (E and P) under market and technical uncertainties. First are presented some simple examples to develop the intuition about concepts like option value and optimal option exercise, comparing them with the concepts from the traditional net present value (NPV) criteria. Next, the classical model of Paddock, Siegel and Smith is presented, including a discussion on the practical values for the input parameters. The modeling of oil price uncertainty is presented by comparing some alternative stochastic processes. Other E and P applications discussed here are the selection of mutually exclusive alternatives under uncertainty, the wildcat drilling decision, the appraisal investment decisions, and the analysis of option to expand the production through optional wells

  13. Valuation of Inventories Considering the Fair Value Options

    Directory of Open Access Journals (Sweden)

    Deaconu Adela

    2008-04-01

    Full Text Available Our paper represents a pleading for fair value in the specific case of valuating inventories. The real significance and implications of fair value can only be seen after analyzing the topic from different points of view concerning all involved actors. Therefore we have based our scientific demarche on analyzing the trade literature and comparing the foresights of international regulations given by both the accounting setting bodies and the valuation setting bodies. Moreover we have followed two of the three moments which require valuation and for these moments we have selected those cases which require the using of fair value. Our opinion regarding the findings of the research is expresses by giving practical examples for the specific application of fair value and the way to reach it.

  14. Real options as an alternative methodology to assess investment projects Las opciones reales como metodología alternativa en la evaluación de proyectos de inversión

    Directory of Open Access Journals (Sweden)

    Raúl Enrique Aristizábal Velásquez

    2012-12-01

    Full Text Available This paper aims to broaden the applicability of the assessment methodology of investment projects through real options as a key element for investment decision making. Traditional project valuation methodologies are described and their gaps, which special characteristic is uncertainty, are presented. A parallel between financial and real options that could be used for valuation is made, using the binomial tree method. Finally, a case study in the construction sector shows a project valuation using expand and waiting options.Este trabajo busca ampliar la aplicabilidad de la metodología de valoración de proyectos de inversión por medio de opciones reales como un elemento fundamental al momento de tomar una decisión de si se debe invertir o no. Se hace un recorrido por las técnicas tradicionales para valorar un proyecto de inversión y se plantean los vacíos que estos dejan, con respecto a proyectos en los que su principal característica es la incertidumbre. Se realiza un paralelo entre las opciones financieras y las opciones reales que per- mita valorar, utilizando la metodología de los árboles binomiales. Por último, se elabora un caso del que se plantea valorar una opción de espera y una opción de expandir de manera conjunta en el sector de la construcción.

  15. Identification of the real options in a program of nuclear plants; Identificacion de las opciones reales en un programa de plantas nucleoelectricas

    Energy Technology Data Exchange (ETDEWEB)

    Camacho G, D.; Diaz N, M. J.; Reinking C, A. [UNAM, Facultad de Ingenieria, Departamento de Sistemas Energeticos, Paseo Cuauhnahuac 8532, Jiutepec, Morelos 62550 (Mexico)]. e-mail: danielkmacho@yahoo.com.mx

    2008-07-01

    The development of our societies and our economies this intimately related to electric power and this as well with the generating sources, due to the projection of world-wide growth should go associate with a strategy of growth of energy generation. Considering to the nuclear power as an option to satisfy the energy needs that a country can provide two main immediate benefits: The stabilization of prices of security of provision of electric power of the nation. The care of the environment, since the gas discharges greenhouse are almost null. At the moment nuclear energy represents economically a viable option for the capital investment, taking into account the development from technology, the policies implemented by the state and the prices of other fuels. Due to the great investment that its require for the nuclear plants are necessary to use financial tools that allow to analyze the future scenes in which ours investment can be seen affected and to value the flexibility of being able to enlarge, to postpone or to stop our project in order to have majors profits or to diminish the lost ones. This valuation of the flexibility can be obtained from the called method Real Options. By analysis of Real Options the process is understood to apply to the methodology of the Financial Options to the valuation of projects or the management of real assets. The Real Options appear in flexible plans, projects, activities or enterprise investments, like for example, to leave or to sell the investment project before concluding it, changing to their use or its technology, to prolong their life, the option to choose, one or the other capacity, among others possibilities. In this work is an example of the application of the method of Real Options in the decision to invest or to defer the investment for the construction of a nuclear plant following the behavior of the tariffs in the market or the costs of generation of other technologies with which a nuclear plant competes. (Author)

  16. Valuation of Real Options as Competitive Prototyping in System Development

    Science.gov (United States)

    2014-07-01

    hedge technology investment risk (Benaroch, 2001), and application to design modularity (Baldwin & Clark, 2000), research and development resource...Valuation Models assume that: (a) future asset behavior and value conform to well-defined processes, (b) markets are complete and arbitrage opportunities

  17. What is the (Real Option) Value of a College Degree?

    OpenAIRE

    Jeffrey R. Stokes

    2013-01-01

    The value of a college degree is often quantified as the difference in earnings between those with and without a degree. The research presented here operationalizes this idea in two important ways. First, since future income and tuition are uncertain, a contingent claims model is developed and the appropriate discount rate for valuing future earnings is, therefore, endogenized given an economy that does not permit arbitrage. Second, the model is sensitive to the valuation of the real option t...

  18. What do you do when the binomial cannot value real options? The LSM model

    Directory of Open Access Journals (Sweden)

    S. Alonso

    2014-12-01

    Full Text Available The Least-Squares Monte Carlo model (LSM model has emerged as the derivative valuation technique with the greatest impact in current practice. As with other options valuation models, the LSM algorithm was initially posited in the field of financial derivatives and its extension to the realm of real options requires considering certain questions which might hinder understanding of the algorithm and which the present paper seeks to address. The implementation of the LSM model combines Monte Carlo simulation, dynamic programming and statistical regression in a flexible procedure suitable for application to valuing nearly all types of corporate investments. The goal of this paper is to show how the LSM algorithm is applied in the context of a corporate investment, thus contributing to the understanding of the principles of its operation.

  19. A Literature Review Fuzzy Pay-Off-Method – A Modern Approach in Valuation

    Directory of Open Access Journals (Sweden)

    Daniel Manaţe

    2015-01-01

    Full Text Available This article proposes to present a modern approach in the analysis of updated cash flows. The approach is based on the Fuzzy Pay-Off-Method (FPOM for Real Option Valuation (ROV. This article describes a few types of models for the valuation of real options currently in use. In support for the chosen FPOM method, we included the mathematical model that stands at the basis of this method and a case study.

  20. VALUATION METHODS- LITERATURE REVIEW

    Directory of Open Access Journals (Sweden)

    Dorisz Talas

    2015-07-01

    Full Text Available This paper is a theoretical overview of the often used valuation methods with the help of which the value of a firm or its equity is calculated. Many experts (including Aswath Damodaran, Guochang Zhang and CA Hozefa Natalwala classify the methods. The basic models are based on discounted cash flows. The main method uses the free cash flow for valuation, but there are some newer methods that reveal and correct the weaknesses of the traditional models. The valuation of flexibility of management can be conducted mainly with real options. This paper briefly describes the essence of the Dividend Discount Model, the Free Cash Flow Model, the benefit from using real options and the Residual Income Model. There are a few words about the Adjusted Present Value approach as well. Different models uses different premises, and an overall truth is that if the required premises are real and correct, the value will be appropriately accurate. Another important condition is that experts, analysts should choose between the models on the basis of the purpose of valuation. Thus there are no good or bad methods, only methods that fit different goals and aims. The main task is to define exactly the purpose, then to find the most appropriate valuation technique. All the methods originates from the premise that the value of an asset is the present value of its future cash flows. According to the different points of view of different techniques the resulted values can be also differed from each other. Valuation models and techniques should be adapted to the rapidly changing world, but the basic statements remain the same. On the other hand there is a need for more accurate models in order to help investors get as many information as they could. Today information is one of the most important resources and financial models should keep up with this trend.

  1. A real option analysis of investments in hydropower-The case of Norway

    International Nuclear Information System (INIS)

    Kjaerland, Frode

    2007-01-01

    This paper presents a valuation study of hydropower investment opportunities in the Norwegian context. According to NVE (Norwegian Water Resources and Energy Directorate, the regulator), there is a potential of 39 TWh not yet developed (generation in a normal year is approximately 120 TWh). By using the conceptual real option framework of Dixit and Pindyck [1994. Investment Under Uncertainty. Princeton University Press, Princeton, NJ] one can estimate the value of investment opportunities to NOK 11 million/GWh (EUR 1.4 million/GWh). Furthermore, the optimal trigger price for initiating an investment based on electricity forward prices is calculated to NOK 0.32/kWh (EUR 0.04/kWh). The analysis shows consistency between real option theory and aggregate investment behaviour in Norwegian hydropower

  2. Control Variates for Monte Carlo Valuation of American Options

    DEFF Research Database (Denmark)

    Rasmussen, Nicki S.

    2005-01-01

    This paper considers two applications of control variates to the Monte Carlo valuation of American options. The main contribution of the paper lies in the particular choice of a control variate for American or Bermudan options. It is shown that for any martingale process used as a control variate...... technique is used for improving the least-squares Monte Carlo (LSM) approach for determining exercise strategies. The suggestions made allow for more efficient estimation of the continuation value, used in determining the strategy. An additional suggestion is made in order to improve the stability...

  3. Valuation of energy enterprises

    International Nuclear Information System (INIS)

    Kjaerland, Frode

    2005-01-01

    Since the deregulation of the energy market in Norway, there has been a number of mergers and acquisitions of energy enterprises. In all these transaction the companies has been valued. The value has often been not insignificant above what the value should be according to traditional methods of valuation. What is the explanation of this premium. This paper describes a project which has as goal to test weather real option theory can explain the difference between actual price and theoretical value based on conventional discounted cash flow methods. This is supposed to be compared with an accounting based residual income approach of valuation. The goal is to see if a real option approach better can explain the value of the transactions in this industry in the past decade, and thereby better understand the value and value components of these enterprises. This is a first draft, and this paper will be rewritten and revised by the presentation in the conference ultimo August 2005. (Author)

  4. Utilizing 3D building and 3D cadastre geometries for better valuation of existing real estate

    NARCIS (Netherlands)

    Isikdag, U.; Horhammer, M.; Zlatanova, S.; Kathmann, R.; Van Oosterom, P.J.M.

    2015-01-01

    Valuation of the properties is known as real estate appraisal, property valuation or land valuation and is a process which focuses on determining the value of a building or a land lot. The valuation of each real estate is required prior to any transaction as every property is unique in terms of

  5. A real-options analysis of wine grape farming in north west Victoria

    OpenAIRE

    Seyoum, Emayenesh; Chan, Chris

    2012-01-01

    This paper reports a use of a real-options valuation methodology to analyse wine grape farm investment under price and yield uncertainty. Revenue levels to incentivise entry and exit were calculated for three different sizes of wine grape farms in North West Victoria. The modelling identified lower exit and higher entry triggers than indicated by conventional net present value calculation. The wide gap of estimated indeterminacy in farm investment highlights the intertwined influence of numer...

  6. Real options analysis for land use management: Methods, application, and implications for policy.

    Science.gov (United States)

    Regan, Courtney M; Bryan, Brett A; Connor, Jeffery D; Meyer, Wayne S; Ostendorf, Bertram; Zhu, Zili; Bao, Chenming

    2015-09-15

    Discounted cash flow analysis, including net present value is an established way to value land use and management investments which accounts for the time-value of money. However, it provides a static view and assumes passive commitment to an investment strategy when real world land use and management investment decisions are characterised by uncertainty, irreversibility, change, and adaptation. Real options analysis has been proposed as a better valuation method under uncertainty and where the opportunity exists to delay investment decisions, pending more information. We briefly review the use of discounted cash flow methods in land use and management and discuss their benefits and limitations. We then provide an overview of real options analysis, describe the main analytical methods, and summarize its application to land use investment decisions. Real options analysis is largely underutilized in evaluating land use decisions, despite uncertainty in policy and economic drivers, the irreversibility and sunk costs involved. New simulation methods offer the potential for overcoming current technical challenges to implementation as demonstrated with a real options simulation model used to evaluate an agricultural land use decision in South Australia. We conclude that considering option values in future policy design will provide a more realistic assessment of landholder investment decision making and provide insights for improved policy performance. Copyright © 2015 Elsevier Ltd. All rights reserved.

  7. THE FARMLAND VALUATION REVISITED

    Directory of Open Access Journals (Sweden)

    Xin Li

    2016-04-01

    Full Text Available Empirical research is scarce concerning the dynamics of farmland markets which inspire the decision to sell farmlands. This paper explores the real option to postpone the sale of land in farmland valuation. In this article, a real options approach is used to analyze farmland prices behavior using historical cash flow and land price information for Illinois. In general, rising farmland values are primarily dependent on agricultural commodity prices and interest rates. Results suggest that uncertainty about future growth and capital gains is a significant component of farmland market value. Furthermore, this research examines several shift factors of the option value of the state’s farmland by taking into account of uncertainty to improve the analysis of farmland market values.

  8. Integrating Sustainability into the Real Estate Valuation Process: A ...

    African Journals Online (AJOL)

    This paper sought the perception of Nigerian real estate valuers on sustainable development and how sustainability can be integrated into the real estate valuation process in Nigeria. One hundred and sixty Estate Surveyors and Valuers were asked, among others, to rate the significance of a range of sustainability features ...

  9. Real estate valuation in the Republic of Serbia

    Directory of Open Access Journals (Sweden)

    Božić Branko S.

    2014-01-01

    Full Text Available There is no complete and systemized infrastructure for efficient and reliable evaluation of real estates in the Republic of Serbia. This is confirmed by analysis of the applicable regulations which treat valuation of real estates in different ways. This practice contradicting numerous standards and applicable directives (INSPIRE directive, Strategy of the development of geospatial data infrastructure in the Republic of Serbia etc., as well as numerous other examples of good practice governing the activities of collecting and maintaining spatial data infrastructure. By the Law on State Survey and Cadaster of the 2009, the Republic Geodetic Authority is ensured to the jurisdiction of the development of mass appraisal, which should provide real estate market value for all real estates in the territory of the Republic of Serbia. In contrast, the position and the role of local government being increasable stronger in creating the budget, which is closely associated with the values of resources and capital which local government have. Determing the property tax is the responsibility of the local government and therefore its role in the process of valuation of immovable property is of great importance. In addition to local governments, the Tax Administration traditionally determines real estate values. This paper analyzes the current situation and initiate further activities on the development of the system of evaluation of real estates in the Republic of Serbia.

  10. Stock price dynamics and option valuations under volatility feedback effect

    Science.gov (United States)

    Kanniainen, Juho; Piché, Robert

    2013-02-01

    According to the volatility feedback effect, an unexpected increase in squared volatility leads to an immediate decline in the price-dividend ratio. In this paper, we consider the properties of stock price dynamics and option valuations under the volatility feedback effect by modeling the joint dynamics of stock price, dividends, and volatility in continuous time. Most importantly, our model predicts the negative effect of an increase in squared return volatility on the value of deep-in-the-money call options and, furthermore, attempts to explain the volatility puzzle. We theoretically demonstrate a mechanism by which the market price of diffusion return risk, or an equity risk-premium, affects option prices and empirically illustrate how to identify that mechanism using forward-looking information on option contracts. Our theoretical and empirical results support the relevance of the volatility feedback effect. Overall, the results indicate that the prevailing practice of ignoring the time-varying dividend yield in option pricing can lead to oversimplification of the stock market dynamics.

  11. Pricing and Applications of Digital Installment Options

    Directory of Open Access Journals (Sweden)

    Pierangelo Ciurlia

    2012-01-01

    Full Text Available For its theoretical interest and strong impact on financial markets, option valuation is considered one of the cornerstones of contemporary mathematical finance. This paper specifically studies the valuation of exotic options with digital payoff and flexible payment plan. By means of the Incomplete Fourier Transform, the pricing problem is solved in order to find integral representations of the upfront price for European call and put options. Several applications in the areas of corporate finance, insurance, and real options are discussed. Finally, a new type of digital derivative named supercash option is introduced and some payment schemes are also presented.

  12. Towards a listed real estate investment valuation model

    Directory of Open Access Journals (Sweden)

    Douw Gert Brand Boshoff

    2013-09-01

    Full Text Available This paper presents a Listed Real Estate Investment Valuation Model that was developed to investigate the movement in indirect real estate investment through the consideration of the underlying assets of property loan stock companies. Specific reference is given to information that is made available to shareholders by way of annual financial statements in order to determine the extent to which shareholders can make investment decisions based on this information. The study enhances the knowledge of direct vs. indirect real estate investment behaviour and provides more insight into price discovery in the property sector.

  13. Time Charters with Purchase Options in Shipping: Valuation and Risk Management

    DEFF Research Database (Denmark)

    Jørgensen, Peter Løchte; De Giovanni, Domenico

    The paper studies the valuation and optimal management of Time Charters with Purchase Options (T/C-POPs) which is a specific type of asset lease with embedded options that is common in shipping markets. T/C-POPs are economically significant and sometimes account for more than half of the stock...... market value of listed shipping companies. The main source of risk in markets for maritime transportation is the freight rate, and we therefore specify a single-factor continuous time model for the dynamic evolution of freight rates which allows us to price a wide variety of freight rate related...

  14. Time Charters with Purchase Options in Shipping: Valuation and Risk Management

    DEFF Research Database (Denmark)

    Jørgensen, Peter Løchte; De Giovanni, Domenico

    2010-01-01

    The article studies the valuation and optimal management of Time Charters with Purchase Options (T/C-POPs), which is a specific type of asset lease with embedded options that is common in shipping markets. T/C-POPs are economically significant and sometimes account for more than half of the stock...... market value of listed shipping companies. The main source of risk in markets for maritime transportation is the freight rate, and we therefore specify a single-factor continuous time model for the dynamic evolution of freight rates that allows us to price a wide variety of freight rate...

  15. A Kramers-Moyal approach to the analysis of third-order noise with applications in option valuation.

    Science.gov (United States)

    Popescu, Dan M; Lipan, Ovidiu

    2015-01-01

    We propose the use of the Kramers-Moyal expansion in the analysis of third-order noise. In particular, we show how the approach can be applied in the theoretical study of option valuation. Despite Pawula's theorem, which states that a truncated model may exhibit poor statistical properties, we show that for a third-order Kramers-Moyal truncation model of an option's and its underlier's price, important properties emerge: (i) the option price can be written in a closed analytical form that involves the Airy function, (ii) the price is a positive function for positive skewness in the distribution, (iii) for negative skewness, the price becomes negative only for price values that are close to zero. Moreover, using third-order noise in option valuation reveals additional properties: (iv) the inconsistencies between two popular option pricing approaches (using a "delta-hedged" portfolio and using an option replicating portfolio) that are otherwise equivalent up to the second moment, (v) the ability to develop a measure R of how accurately an option can be replicated by a mixture of the underlying stocks and cash, (vi) further limitations of second-order models revealed by introducing third-order noise.

  16. A decision model for E and P petroleum projects using real options and preference theory

    Energy Technology Data Exchange (ETDEWEB)

    Lima, Gabriel A.C. [Universidade Estadual de Campinas, SP (Brazil). Inst. de Geociencias. Lab. de Analise Geoconomica (LAGE); Suslick, Saul B. [Universidade Estadual de Campinas, SP (Brazil). Inst. de Geociencias. Centro de Estudo do Petroleo; Nepomuceno Filho, Francisco [PETROBRAS, Rio de Janeiro, RJ (Brazil)

    2004-07-01

    The results from Discounted Cash Flow (DCF) are limited as a tool for decision-making in the petroleum industry because they do not properly take into account three important features of the modern investments: uncertainty, irreversibility, timing and corporation's risk-aversion. Recent developments in real options and preference theories have allowed decision-makers to employ these two approaches separately in the process of valuation and decision-making of risky projects. This paper presents a model for valuation and decision-making integrating discounted cash flow, real options and reference theory. This model seems to be suitable to answer to the following questions: what is the current value of an oil project? what is the optimal working interest in this project venture?; what is criteria to select projects considering investment irreversibility, uncertainty and timing to implement decisions? This model is applied to valuation and decision-making of a project to produce oil from a deep-water reservoir and its results are compared to those of the traditional approach. NPV model suggest that, as the project value is above its investment cost, the corporation should invest immediately and take 100% working interest in the project. Contrarily, the integrated model suggest the corporation should invest as long as project current value is as large as 1.85 times investment cost and should take only 44.38% working interest, whereas partners fund and acquire the remaining 55,62% of the project. In general, results indicate that NPV tend to pay more attention on return and does not account properly for risk. Then, as the uncertainty or volatile of strategic variables increases, the two models give more divergent results. (author)

  17. Manager’s Flexibility & Cancellation Option: Insights of a Case Study in the Latin American Oil Industry

    Directory of Open Access Journals (Sweden)

    Arthur Ridolfo Neto

    2017-05-01

    Full Text Available Purpose: This article focused on the main business insights of the use of Real Options valuation analysis in the eyes of a finance professional. It used a case study of an investment opportunity in the oil and gas field services industry in Latin America to discuss the methodology implementation and its insights. As a secondary objective, it discussed the insights and options embedded in this investment opportunity.Methodology: The investment opportunity was examined using the Real Options Analysis (ROA framework and the results compared to the traditional methodology of Net Present Value. The valuation technique was performed as if it had been applied at the time the project was approved.Findings: The most important of Real Option valuation is not the results, but how one arrives at them. After the project value is calculated and the project approved or not, the Real Option valuation requires and supports the monitoring of the project. By understanding how the options are created, managers can make better decisions about the project after it was approved.Practical implications: A relevant contribution from the study was the discussion, as a practitioner, of the methodology implementation in a real world corporation. Originality & value: The case study evaluated two types of real options: first, the effect of an option to cancel a contract that was assessed from the perspective of the client contracting the project; and second, the option to abandon and defer, from the perspective of the company that will perform the investment to provide the services. By incorporating the cost of the put option that the company puts forth for the client (cancellation option it reduces the project value by giving flexibility to its clients.

  18. Real options valuation of US federal renewable energy research, development, demonstration, and deployment

    International Nuclear Information System (INIS)

    Siddiqui, Afzal S.; Marnay, Chris; Wiser, Ryan H.

    2007-01-01

    Benefits analysis of US Federal government research, development, demonstration, and deployment (RD 3 ) programmes for renewable energy (RE) technology improvement typically employs a deterministic forecast of the cost and performance of renewable and non-renewable fuels. The benefits estimate for the programme derives from the difference between two forecasts, with and without the RD 3 programme in place. Three deficiencies of this approach are that it ignores: (1) uncertainty in the cost of non-renewable energy (NRE); (2) the possibility of adjustment to the RD 3 effort commensurate with the evolving state of the world; and (3) the underlying technical risk associated with RD 3 . In this paper, an intuitive approach to determining the option value of RE RD 3 is developed. This approach seeks to tackle the first two deficiencies noted above by providing an estimate via a compound real option of an RE RD 3 programme in a future with uncertain NRE costs. A binomial lattice reveals the economic intuition underlying the decision-making process, while a numerical example illustrates the option components embedded in a simplified representation of current US Federal RE RD 3

  19. Efficient option valuation of single and double barrier options

    Science.gov (United States)

    Kabaivanov, Stanimir; Milev, Mariyan; Koleva-Petkova, Dessislava; Vladev, Veselin

    2017-12-01

    In this paper we present an implementation of pricing algorithm for single and double barrier options using Mellin transformation with Maximum Entropy Inversion and its suitability for real-world applications. A detailed analysis of the applied algorithm is accompanied by implementation in C++ that is then compared to existing solutions in terms of efficiency and computational power. We then compare the applied method with existing closed-form solutions and well known methods of pricing barrier options that are based on finite differences.

  20. A state-space model for residential real estate valuation

    NARCIS (Netherlands)

    Francke, M.

    2010-01-01

    All property in the Netherlands has to be appraised yearly. Yearly valuation has only been made possible with the help of models. The number of real estate appraisers is simply too small to value the more than 7 million residential properties. This paper describes the statistical model that is used

  1. Arbitrage-free valuation of energy derivatives

    International Nuclear Information System (INIS)

    Amin, K.; Ng, V.; Pirrong, C.

    1999-01-01

    This chapter focuses on techniques available for valuing energy-contingent claims and develops an arbitrage-free framework to value energy derivatives. The relationship between the spot, forward and futures prices is explained. Option valuation with deterministic convenience yields is discussed using an extension of the Black (1976) framework, and details of the risk-neutral valuation of European options, and valuation of American and European-style options are given. Option valuations with stochastic convenience yields, the evolution of the term structure of convenience yield, and a tree approach to valuing American and other options are discussed. Applications and limitations of the models for pricing energy derivative products are considered. The stochastic differential equation for the futures prices when the convenience yields are stochastic is presented in an appendix

  2. Use of real options in nuclear power plant valuation in the presence of uncertainty with CO2 emission credit

    International Nuclear Information System (INIS)

    Kiriyama, Eriko; Suzuki, Atsuyuki

    2004-01-01

    The purpose of this study is to analyze the value of an investment in power generation assets that do not emit CO 2 , by using a real option model. This study evaluates the effects of future uncertainty on investment decision-making, by focusing on the uncertainty of CO 2 emission credits [yen/t-CO 2 ] in the fairly near future in Japan. Electric utilities are required to keep plans to prepare for various future uncertainties such as the price of CO 2 emission credits. The real option approach can evaluate the option value of decision-making under uncertainty. This study examined the option value of a power plant [yen/KW] to evaluate the effects of an externality under uncertainty. The results showed that nuclear power would have the most value under the forthcoming CO 2 emission limitations. In order to secure the effectiveness of measures against global warming, we should reconsider the roles of nuclear power plants in Japan. Finally, the real option model is shown to be an effective candidate for a decision-making support tool to deal with problems in energy environmental policy. (author)

  3. RUSSIAN AND FOREIGN PRACTICE OF VALUATING MUNICIPAL REAL ESTATE

    Directory of Open Access Journals (Sweden)

    Oleg V. Likhomanov

    2017-09-01

    Full Text Available The authors analyze the real estate tax system of England, France, Germany, the USA, Canada, Sweden, Denmark, Holland, Spain, Portugal, Poland, Chile, Singapore, the Philippines, and Japan. The following activities are proposed with the aim of creating an effective system of municipal real estate management and improving the quality of local government: to organize the smooth functioning of full and timely accounting of the municipal real estate, the introduction of an automated registry system, including legal, technical, and economic components of records; to develop scientifically based optimal management solutions on the disposal of municipal property, in compliance with the balance of fiscal, investment and socially-oriented objectives in the course of operational management, transfer in use or trust, disposition, use as the authorized capital; to develop the optimal solutions for selecting strategies for achieving maximum economic efficiency and increasing investment attractiveness of municipal property; to exercise effective control over regulatory use of municipal property (especially land resources for its intended purpose; to organize work on reliable cadastral valuation of the property; to provide the state budget institutions for cadastral valuation established in the regions with qualified personnel from among the practicing independent appraisers; to engage independent appraisers for analysis and monitoring of real estate market with the aim of identifying pricing factors and ensuring reliable results, compliant with relevant market data; to completely eliminate the possibility of pressure by officials of local self-government bodies at the state budget institutions for the cadastral valuation to establish the desired orientations of the cadastral value. The authors propose to initiate the introduction of uniform date of establishment of the cadastral value on the territory of the Russian Federation with the aim of providing a

  4. Valuation of European Call Option via Inverse Fourier Transform

    Directory of Open Access Journals (Sweden)

    Rubenis Oskars

    2017-12-01

    Full Text Available Very few models allow expressing European call option price in closed form. Out of them, the famous Black- Scholes approach sets strong constraints - innovations should be normally distributed and independent. Availability of a corresponding characteristic function of log returns of underlying asset in analytical form allows pricing European call option by application of inverse Fourier transform. Characteristic function corresponds to Normal Inverse Gaussian (NIG probability density function. NIG distribution is obtained based on assumption that time series of log returns follows APARCH process. Thus, volatility clustering and leptokurtic nature of log returns are taken into account. The Fast Fourier transform based on trapezoidal quadrature is numerically unstable if a standard cumulative probability function is used. To solve the problem, a dampened cumulative probability is introduced. As a computation tool Matlab framework is chosen because it contains many effective vectorization tools that greatly enhance code readability and maintenance. The characteristic function of Normal Inverse Gaussian distribution is taken and exercised with the chosen set of parameters. Finally, the call price dependence on strike price is obtained and rendered in XY plot. Valuation of European call option with analytical form of characteristic function allows further developing models with higher accuracy, as well as developing models for some exotic options.

  5. Option Price Estimates for Water Quality Improvements: A Contingent Valuation Study for the Monongahela River (1985)

    Science.gov (United States)

    This paper presents the findings from a contingent valuation survey designed to estimate the option price bids for the improved recreation resulting from enhanced water quality in the Pennsylvania portion of the Monongahela River.

  6. APPLICATION OF THE SYNERGETIC APPROACH IN THE THEORY OF REAL ESTATE VALUATION

    Directory of Open Access Journals (Sweden)

    Olga BUZU

    2014-08-01

    Full Text Available Synergetic approach is especially evident in the area of real estate valuation. Constituents and legal and material elements of the real estate, many components of these objects imply the emergence of new qualities (high value of the unique real estate. It is proposed to analyze the synergy of different levels in determining the value of real estate, with the inclusion of the principle of synergy in a set of principles for determining the property value.

  7. Valuation of wind power distributed generation by using Longstaff–Schwartz option pricing method

    International Nuclear Information System (INIS)

    Díaz, Guzmán; Moreno, Blanca; Coto, José; Gómez-Aleixandre, Javier

    2015-01-01

    Highlights: • We analyze the economic value of wind power distributed generation (DG) projects. • Unlike NPV, RO approach accounts for the flexibility for decision-making. • We adapt Longstaff–Schwartz (LS) option pricing to multivariate wind power setting. • LS finds optimal times for DG investment under revenue uncertainty and decaying costs. • We find this method best suited for valuating DG projects of expected low revenue. - Abstract: In the context of decaying capital cost and uncertain revenues, prospective valuation of a wind power distributed generation (DG) project is difficult. The conventional net present value (NPV) presents a static picture that does not account for the value of waiting for better market conditions to proceed with a DG investment. On the contrary, real options (RO) analysis does account for the managerial flexibility to switch between options over the investment horizon. In this paper we argue that the value of a DG wind-based project can be revisited by means of Longstaff–Schwartz method, originally intended for the evaluation of American financial options. The adaption of this method to the wind power DG setting provides a means for (i) efficiently dealing with the several stochastic processes involved (spot electricity prices and possibly various wind speed processes) avoiding the curse of dimensionality, (ii) accounting for the decaying capital cost of DG, and (iii) solving the perfect foresight problem presented by Monte Carlo conventional simulations. We present in this paper the procedure to follow when applying the method to the wind power DG setting. Particularly, we discuss the standardization of the wind speed and spot price processes, and the advantages of building a state space model that includes all the correlated processes by adequately transforming Box–Jenkins and Ornstein–Uhlenbeck models. Also we discuss the representation of the capital cost forecast by means of learning curves. On the whole, we

  8. Variable capacity utilization, ambient temperature shocks and generation asset valuation

    Energy Technology Data Exchange (ETDEWEB)

    Tseng, Chung-Li; Dmitriev, Alexandre [Australian School of Business, University of New South Wales, Sydney NSW 2052 (Australia); Zhu, Wei [Optim Energy, 225 E. John Carpenter Freeway, Irving, TX 75062 (United States)

    2009-11-15

    This paper discusses generation asset valuation in a framework where capital utilization decisions are endogenous. We use real options approach for valuation of natural gas fueled turbines. Capital utilization choices that we explore include turning on/off the unit, operating the unit at increased firing temperatures (overfiring), and conducting preventive maintenance. Overfiring provides capacity enhancement which comes at the expense of reduced maintenance interval and increased costs of part replacement. We consider the costs and benefits of overfiring in attempt to maximize the asset value by optimally exercising the overfire option. In addition to stochastic processes governing prices, we incorporate an exogenous productivity shock: ambient temperature. We consider how variation in ambient temperature affects the asset value through its effect on gas turbine's productivity. (author)

  9. Real option valuation of a decremental regulation service provided by electricity storage.

    Science.gov (United States)

    Szabó, Dávid Zoltán; Martyr, Randall

    2017-08-13

    This paper is a quantitative study of a reserve contract for real-time balancing of a power system. Under this contract, the owner of a storage device, such as a battery, helps smooth fluctuations in electricity demand and supply by using the device to increase electricity consumption. The battery owner must be able to provide immediate physical cover, and should therefore have sufficient storage available in the battery before entering the contract. Accordingly, the following problem can be formulated for the battery owner: determine the optimal time to enter the contract and, if necessary, the optimal time to discharge electricity before entering the contract. This problem is formulated as one of optimal stopping, and is solved explicitly in terms of the model parameters and instantaneous values of the power system imbalance. The optimal operational strategies thus obtained ensure that the battery owner has positive expected economic profit from the contract. Furthermore, they provide explicit conditions under which the optimal discharge time is consistent with the overall objective of power system balancing. This paper also carries out a preliminary investigation of the 'lifetime value' aggregated from an infinite sequence of these balancing reserve contracts. This lifetime value, which can be viewed as a single project valuation of the battery, is shown to be positive and bounded. Therefore, in the long run such reserve contracts can be beneficial to commercial operators of electricity storage, while reducing some of the financial and operational risks in power system balancing.This article is part of the themed issue 'Energy management: flexibility, risk and optimization'. © 2017 The Author(s).

  10. Calculation Aspects of the European Rebalanced Basket Option using Monte Carlo Methods: Valuation

    Directory of Open Access Journals (Sweden)

    CJ van der Merwe

    2012-06-01

    Full Text Available Extra premiums can be charged to a client to guarantee a minimum payout of a contract on a portfolio that gets rebalanced on a regular basis back to fixed proportions. The valuation of this premium can be changed to that of the pricing of a European put option with underlying rebalanced portfolio. This article finds the most efficient estimators for the value of this path-dependant multi-asset put option using different Monte Carlo methods. With the help of a refined method, computing time of the value decreased significantly. Furthermore, Variance Reduction Techniques and Quasi-Monte Carlo methods delivered more accurate and faster converging estimates as well.

  11. A fast numerical method for the valuation of American lookback put options

    Science.gov (United States)

    Song, Haiming; Zhang, Qi; Zhang, Ran

    2015-10-01

    A fast and efficient numerical method is proposed and analyzed for the valuation of American lookback options. American lookback option pricing problem is essentially a two-dimensional unbounded nonlinear parabolic problem. We reformulate it into a two-dimensional parabolic linear complementary problem (LCP) on an unbounded domain. The numeraire transformation and domain truncation technique are employed to convert the two-dimensional unbounded LCP into a one-dimensional bounded one. Furthermore, the variational inequality (VI) form corresponding to the one-dimensional bounded LCP is obtained skillfully by some discussions. The resulting bounded VI is discretized by a finite element method. Meanwhile, the stability of the semi-discrete solution and the symmetric positive definiteness of the full-discrete matrix are established for the bounded VI. The discretized VI related to options is solved by a projection and contraction method. Numerical experiments are conducted to test the performance of the proposed method.

  12. Sales Comparison Approach Indicating Heterogeneity of Particular Type of Real Estate and Corresponding Valuation Accuracy

    Directory of Open Access Journals (Sweden)

    Martin Cupal

    2017-01-01

    Full Text Available The article focuses on heterogeneity of goods, namely real estate and consequently deals with market valuation accuracy. The heterogeneity of real estate property is, in particular, that every unit is unique in terms of its construction, condition, financing and mainly location and thus assessing the value must necessarily be difficult. This research also indicates the rate of efficiency of markets across the types based on their level of variability. The research is based on two databases consisting of various types of real estate with specific market parameters. These parameters determine the differences across the types and reveal heterogeneity. The first database has been set on valuations by sales comparison approach and the second one on data of real properties offered on the market. The methodology is based on univariate and multivariate statistics of key variables of those databases. The multivariate analysis is performed by Hotelling T2 control chart and statistics with appropriate numerical characteristics. The results of both databases were joint by weights with regard to the dependence criterion of the variables. The final results indicate potential valuation accuracy across the types. The main contribution of the research is that the evaluation was not only derived from the price deviation or distribution, but it also draws from causes of real property heterogeneity as a whole.

  13. Getting real with real options

    OpenAIRE

    M. R Grasselli

    2006-01-01

    We apply a utility-based method to obtain the value of a finite-time investment opportunity when the underlying real asset is not perfectly correlated to a traded financial asset. Using a discrete-time algorithm to calculate the indifference price for this type of real option, we present numerical examples for the corresponding investment thresholds, in particular highlighting their dependence with respect to correlation and risk aversion.

  14. A Real Options Approach to Bankruptcy Costs: Evidence from Failed Commercial Banks During the 1990s

    OpenAIRE

    Joseph R. Mason

    2005-01-01

    Literature to date has identified three main aspects of liquidation time: firm size, asset specificity, and industry concentration. The present paper unifies the theory behind these three aspects of bankruptcy costs by treating them as components of a broader option valuation problem faced by the liquidating trustee. In the options valuation framework, at time t the trustee may choose to 1) liquidate at current asset values and incur a known loss, or 2) hold until the next period t+1 at a pos...

  15. The Real Options Attached to an Investment Project

    Directory of Open Access Journals (Sweden)

    Mihai-Cristian DINICĂ

    2011-12-01

    Full Text Available The real options capture the importance of the managerial team’s role in creating value through investment projects. The investments in real assets have a set of options that managers can exercise during the period of the project to increase the value of the assets or to limit the eventual losses. This options have their own value.The traditional methods for investment project evaluatioan, based on discounted cash flows, have some major disadvantages: they assume the irreversibility of a decision, do not take into account the interactions between decisions in several periods and treat the investment as pasive. The evaluation using real options undertake this disadvantage. The paper shows the main types of real options, together with their elements and captures the impact of these options on the value of the investment. The main two models used to evaluate real options, the binomial model and Black-Scholes model, are explained and used to compute the value of real options attached to an investment project.

  16. Valuation of switchable tariff for wind energy

    International Nuclear Information System (INIS)

    Yu, Wang; Sheble, Gerald B.; Lopes, Joao A. Pecas; Matos, Manuel Antonio

    2006-01-01

    The current fixed tariff remuneration for wind energy is not compatible with the deregulation of the electric power industry. The time-varying and location-dependent value of renewable energy is not acknowledged. The newly announced switchable tariff for wind energy in the Spanish electricity market provides a promising solution to compensating renewable energy within the deregulated electric power industry. The new switchable tariff provides wind generators more flexibility in operating wind generation assets. Such flexibilities provide option value in coordinating the seasonality of wind energy, demand on electric power and electricity prices movement. This paper models and valuates the flexibility on switching tariff as real compound options for wind generators. Numerical examples valuate wind generation assets under fixed tariff, spot market price taking, and yearly and monthly switchable tariffs. The optimal switching strategies are identified. The impacts of the switchable tariff on sitting criteria and values of wind generation assets are investigated. An improvement on the yearly switchable tariff is suggested to further reduce the operation risk of wind generators and fully explore the efficiency provided by competitive electricity markets. (author)

  17. 26 CFR 1.170A-12 - Valuation of a remainder interest in real property for contributions made after July 31, 1969.

    Science.gov (United States)

    2010-04-01

    ... with one or more lives. (1)(i) If the valuation of the remainder interest in the real property is... 26 Internal Revenue 3 2010-04-01 2010-04-01 false Valuation of a remainder interest in real property for contributions made after July 31, 1969. 1.170A-12 Section 1.170A-12 Internal Revenue INTERNAL...

  18. Acquisitions Through a Behavioral and Real Options Lens

    NARCIS (Netherlands)

    J.C.M. Kil (Joris)

    2013-01-01

    textabstractThis thesis combines four studies that contribute to our understanding of corporate acquisitions by taking a behavioral and real options perspective. Chapter 2 classifies acquisitions based on real option characteristics and shows option type (single vs. compound) and option nature

  19. THE REAL OPTIONS OF CAPITAL BUDGET

    Directory of Open Access Journals (Sweden)

    Antonio Lopo Martins

    2008-07-01

    Full Text Available The traditional techniques of capital budget, as the deducted cash flow and the net value present, do not incorporate existing flexibilities in an investment project, they tend to distort the value of certain investments, mainly those that are considered in scenes of uncertainty and risk. Therefore, this study intends to demonstrate that the Real Options Theory (TOR is a useful methodology to evaluate and to indicate the best option for project of expansion investment. To reach the considered objective the procedure method was used a case study, having as unit of case the Resort Praia Hotel do Litoral Norte of Salvador. This study was developed of the following form: first it identified the traditional net value present and later it was incorporated the volatileness of each analyzed uncertainty. Second, as the real options are analogous to the financial options, it was necessary to identify elements that composed the terminologies of the financial options with intention to get the value of the real option. For this model of options pricing of Black & Scholes jointly with a computational simulator was used (SLS to get the expanded net value present. As a result of this study it was possible to evidence that using the traditional tool of capital budget Net Value Present (VPL is negative, therefore the project of expansion of the Hotel would be rejected. While for the application of methodology TOR the project presents positive Expanded Present Value which would represent an excellent chance of investment. Key-word: Capital budget, Real options, Analysis of investments.

  20. Reducing uncertainty in load forecasts and using real options for improving capacity dispatch management through the utilization of weather and hydrologic forecasts

    International Nuclear Information System (INIS)

    Davis, T.

    2004-01-01

    The effect of weather on electricity markets was discussed with particular focus on reducing weather uncertainty by improving short term weather forecasts. The implications of weather for hydroelectric power dispatch and use were also discussed. Although some errors in weather forecasting can result in economic benefits, most errors are associated with more costs than benefits. This presentation described how a real options analysis can make weather a favorable option. Four case studies were presented for exploratory data analysis of regional weather phenomena. These included: (1) the 2001 California electricity crisis, (2) the delta breeze effects on the California ISO, (3) the summer 2002 weather forecast error for ISO New England, and (4) the hydro plant asset valuation using weather uncertainty. It was concluded that there is a need for more economic methodological studies on the effect of weather on energy markets and costs. It was suggested that the real options theory should be applied to weather planning and utility applications. tabs., figs

  1. Proper Valuation of Perpetuities in an Inflationary Environment without Real Growth

    Directory of Open Access Journals (Sweden)

    Ignacio Vélez-Pareja

    2008-05-01

    Full Text Available We examine the proper valuation of perpetuities without real growth. The case of a “pure” non growing perpetuity (zero real growth and zero inflation is of academic interest but in practice it might be difficult to find. The findings contradict what is generally accepted in the literature. In particular we examine the textbook formula for calculating thevalue of a perpetuity.When working with perpetuities we are in presence of a Chinese box: we have found that when working with perpetuities in a scenario of non zero inflation and zero real growth value increases with inflation. On the other hand, the textbook formula for calculating a non growing perpetuity in the same scenario under values the value of the perpetuity by relevant amounts.

  2. Long expansion planning of electrical power availability in Brazil under the real options theoretical approach; Planejamento de longo prazo da expansao da oferta de energia eletrica no Brasil sob uma perspectiva da teoria das opcoes reais

    Energy Technology Data Exchange (ETDEWEB)

    Marreco, Juliana de Moraes

    2007-05-15

    This thesis considers uncertainty on the long term generation expansion planning in the Brazilian Electric System, under a Real Options Approach . First, Real Options Theory is used to demonstrate the importance of thermo power plants insertion in Brazil, through a flexibility valuation on hydrothermal system. This is the first objective of this thesis. In the second part a Real Options Model is proposed to support long term expansion studies, based in a levelized costs analysis. The adequacy of proposed models to real problem is illustrated by a case study of the Brazilian Power System. The results show the importance of the energetic matrix diversification on the Long Term Planning. In the expansion model proposed, results are in favor of higher participation of biomass, nuclear power and coal in Brazilian electricity generation matrix. (author)

  3. Franchise ownership redirection: real options perspective

    OpenAIRE

    Nugroho, Lukito Adi

    2016-01-01

    Background: For over 40 years, the franchise ownership redirection hypothesis has attracted the attention of many scholars. This study, differing from previous ones, proposes an alternative approach for this hypothesis using a real options framework with the extension of agency theory. Method: The real options model is built using the least square Monte Carlo method, where the franchisor's decision to franchise is perceived as a deferred investment while maintaining the right of future acquis...

  4. The Challenges for Real Estate Mass Valuation and Taxation System for the Economic Stabilization of Latvia

    OpenAIRE

    Barvika, S; Rausis, A; Geipele, I

    2012-01-01

    The real estate tax policy, as well as a massive reform in the real estate mass valuation was among major reforms of the Latvian government in the financial crisis management plan. These reforms were supported by the International Monetary Fund and European Commission. One of the directions for economic recovery suggested by the lenders to Latvia was a reform of taxation system including reviewing of stagnated real property tax principles. This reform met total critici...

  5. R&D Project Valuation Considering Changes of Economic Environment: A Case of a Pharmaceutical R&D Project

    Directory of Open Access Journals (Sweden)

    Jung Ho Park

    2018-03-01

    Full Text Available R&D project valuation is important for effective R&D portfolio management through decision making, related to the firm’s R&D productivity, sustainable management. In particular, scholars have emphasized the necessities of capturing option value in R&D and developed methods of real option valuation. However, despite suggesting various real option models, there are few studies on simultaneously employing mean-reverting stochastic process and Markov regime switching to describe the evolution of cash flow and to reflect time-varying parameters resulting from changes of economic environment. Therefore, we suggest a mean-reverting binomial lattice model under Markov regime switching and apply it to evaluate clinical development with project cases of the pharmaceutical industry. This study finds that decision making can be different according to the regime condition, thus the suggested model can capture risks caused by the uncertainty of the economic environment, represented by regime switching. Further, this study simulates the model according to rate parameter from 0.00 to 1.00 and risk-free interest rates for regimes 1 and 2 from ( r 1 = 4%, r 2 = 2% to ( r 1 = 7%, r 2 = 5%, and confirms the rigidity of the model. Therefore, in practice, the mean-reverting binomial lattice model under Markov regime switching proposed in this study for R&D project valuation contributes to assisting company R&D project managers make effective decision making considering current economic environment and future changes.

  6. Valuing real options: frequently made errors

    OpenAIRE

    Fernández, Pablo

    2002-01-01

    In this paper we analyze frequently made errors when valuing real options. The best way of doing it is through examples. We start by analyzing Damodaran's proposal to value the option to expand the business of Home Depot. Some of the errors and problems of this and other approaches are: - Assuming that the option is replicable and using Black and Scholes' formula. - The estimation of the option's volatility is arbitrary and has a decisive effect on the option's value. - As there is no riskles...

  7. The improved business valuation model for RFID company based on the community mining method.

    Science.gov (United States)

    Li, Shugang; Yu, Zhaoxu

    2017-01-01

    Nowadays, the appetite for the investment and mergers and acquisitions (M&A) activity in RFID companies is growing rapidly. Although the huge number of papers have addressed the topic of business valuation models based on statistical methods or neural network methods, only a few are dedicated to constructing a general framework for business valuation that improves the performance with network graph (NG) and the corresponding community mining (CM) method. In this study, an NG based business valuation model is proposed, where real options approach (ROA) integrating CM method is designed to predict the company's net profit as well as estimate the company value. Three improvements are made in the proposed valuation model: Firstly, our model figures out the credibility of the node belonging to each community and clusters the network according to the evolutionary Bayesian method. Secondly, the improved bacterial foraging optimization algorithm (IBFOA) is adopted to calculate the optimized Bayesian posterior probability function. Finally, in IBFOA, bi-objective method is used to assess the accuracy of prediction, and these two objectives are combined into one objective function using a new Pareto boundary method. The proposed method returns lower forecasting error than 10 well-known forecasting models on 3 different time interval valuing tasks for the real-life simulation of RFID companies.

  8. A parametric approach for the valuation of power plant flexibility options

    Directory of Open Access Journals (Sweden)

    Julia Hentschel

    2016-11-01

    Full Text Available Conventional generation units encounter a changing role in modern societies’ energy supply. With increased need for flexible operation, engineers and project managers have to evaluate the benefits of technical improvements. For this purpose, a valuation tool has been developed, comparing economical cornerstones and technical constraints of generation units to European Energy Exchange prices for PHELIX 2014. It enables the user to relate a change in technical parameters to an economic effect and possible revenues. Four different types of conventional power plants are investigated in scenarios with increasing CO2 and fuel prices to determine the impact of different flexibility options. Results show that an increased ramp rate has not the same magnitude of positive economic impact as reduced minimum operation load, based on an observation on a price signal with resolution of fifteen minutes.

  9. INVESTMENT IN ANTIVIRAL DRUGS : A REAL OPTIONS APPROACH

    NARCIS (Netherlands)

    Attema, Arthur E.; Lugner, Anna K.; Feenstra, Talitha L.

    2010-01-01

    Real options analysis is a promising approach to model investment under uncertainty. We employ this approach to value stockpiling of antiviral drugs as a precautionary measure against a possible influenza pandemic. Modifications of the real options approach to include risk attitude and deviations

  10. An Application of the Real Options Method to the Valuation of a License to Operate 3G Mobile Phone Service in Brazil.

    Directory of Open Access Journals (Sweden)

    Rafael Stille

    2010-10-01

    Full Text Available We analyze the contributions of the real option method to the decision making process in the telecommunications industry. We study the case of a public auction purchase of the license to operate a 3G mobile phone system in Brazil. The results indicate that the embedded flexibilities increase the value of the project by 64% in relative to the discounted cash flow method, which could justify the high premiums paid by the winning firms, which are incompatible with the value obtained from traditional methods of analysis. This suggests that the real options approach used, which can be easily replicated and is fairly intuitive, can be a useful tool to support the decision making process of these firms.

  11. Corporate social responsibility: a real options approach to the challenge of financial sustainability.

    Science.gov (United States)

    Bosch-Badia, Maria-Teresa; Montllor-Serrats, Joan; Tarrazon-Rodon, Maria-Antonia

    2015-01-01

    In contemporary complex societies, social values like ethics, corporate social responsibility, and being respectful with the environment, among others, are becoming social requirements. Corporations are expected to fulfill them and, according to empirical evidence, an overwhelming majority aspires to good social valuation. At the same time, the maximization of market share value in the long run continues to be the central corporate goal. Making environmental and social expenses compatible with value creation is a central challenge for corporations since it implies the financial sustainability of Corporate Social Responsibility (CSR). The value creation capacity of CSR projects, mainly through innovation, is widely acknowledged in economic literature and corporate practice. This fact arouses the need of having a quantitative framework capable of summarizing the value creation capacity of the variables involved in CSR projects. With this aim we build up a sensitivity analysis of real option ratios that studies and quantifies the value creation capacity of CSR projects connected with innovation. Ratio analysis has the advantage of being scale independent. Hence, it furnishes a homogeneous framework to express the interaction of value creation variables and, thus, supports strategic thinking quantitatively. Often, CSR expenses can be regarded as preliminary projects that create the opportunity to undertake a full future project. For them, we obtain the minimum expectations scenario that makes financially sustainable a preliminary project that can be interpreted as a call option. We propose a classification of CSR projects from the decision analysis perspective following a two-fold approach: Their relationship with value creation and their links with existing corporate activities. This classification of CSR projects aims at contributing to choose the best capital budgeting method to study the financial sustainability of the project and identifying those CSR projects

  12. Corporate social responsibility: a real options approach to the challenge of financial sustainability.

    Directory of Open Access Journals (Sweden)

    Maria-Teresa Bosch-Badia

    Full Text Available In contemporary complex societies, social values like ethics, corporate social responsibility, and being respectful with the environment, among others, are becoming social requirements. Corporations are expected to fulfill them and, according to empirical evidence, an overwhelming majority aspires to good social valuation. At the same time, the maximization of market share value in the long run continues to be the central corporate goal. Making environmental and social expenses compatible with value creation is a central challenge for corporations since it implies the financial sustainability of Corporate Social Responsibility (CSR.The value creation capacity of CSR projects, mainly through innovation, is widely acknowledged in economic literature and corporate practice. This fact arouses the need of having a quantitative framework capable of summarizing the value creation capacity of the variables involved in CSR projects. With this aim we build up a sensitivity analysis of real option ratios that studies and quantifies the value creation capacity of CSR projects connected with innovation. Ratio analysis has the advantage of being scale independent. Hence, it furnishes a homogeneous framework to express the interaction of value creation variables and, thus, supports strategic thinking quantitatively. Often, CSR expenses can be regarded as preliminary projects that create the opportunity to undertake a full future project. For them, we obtain the minimum expectations scenario that makes financially sustainable a preliminary project that can be interpreted as a call option. We propose a classification of CSR projects from the decision analysis perspective following a two-fold approach: Their relationship with value creation and their links with existing corporate activities. This classification of CSR projects aims at contributing to choose the best capital budgeting method to study the financial sustainability of the project and identifying

  13. Towards phronetic knowledge for strategic planning in corporate real estate management: A real options approach

    NARCIS (Netherlands)

    van Reedt Dortland, Maartje; Voordijk, Johannes T.; Dewulf, Geert P.M.R.

    2014-01-01

    Purpose – The objective of this paper is to provide insights about the potential of real option thinking for corporate real estate management (CREM) from the owner-user perspective. A promising approach to classifying and evaluating flexibility in real estate is the real options approach. Most

  14. Real option analysis in a replicating portfolio perspective

    NARCIS (Netherlands)

    van Heeswijk, W.J.A.; Joosten, Reinoud A.M.G.; Huisman, Kuno; Bos, Christian

    2013-01-01

    In the last decades, a vast body of literature has arisen on real option analysis (ROA). The use of di¤erent approaches and the often implicit adoption of major assumptions may cause confusion on what ROA precisely entails, or in which situations it may be applied. We assess the �eld of real option

  15. 26 CFR 1.170A-12T - Valuation of a remainder interest in real property for contributions made after July 31, 1969...

    Science.gov (United States)

    2010-04-01

    ... depreciation factor. If the valuation of the remainder interest in depreciable property is dependent upon the... 26 Internal Revenue 3 2010-04-01 2010-04-01 false Valuation of a remainder interest in real property for contributions made after July 31, 1969 (temporary). 1.170A-12T Section 1.170A-12T Internal...

  16. The Application of Classical and Neural Regression Models for the Valuation of Residential Real Estate

    Directory of Open Access Journals (Sweden)

    Mach Łukasz

    2017-06-01

    Full Text Available The research process aimed at building regression models, which helps to valuate residential real estate, is presented in the following article. Two widely used computational tools i.e. the classical multiple regression and regression models of artificial neural networks were used in order to build models. An attempt to define the utilitarian usefulness of the above-mentioned tools and comparative analysis of them is the aim of the conducted research. Data used for conducting analyses refers to the secondary transactional residential real estate market.

  17. Perpetual Cancellable American Call Option

    OpenAIRE

    Emmerling, Thomas J.

    2010-01-01

    This paper examines the valuation of a generalized American-style option known as a Game-style call option in an infinite time horizon setting. The specifications of this contract allow the writer to terminate the call option at any point in time for a fixed penalty amount paid directly to the holder. Valuation of a perpetual Game-style put option was addressed by Kyprianou (2004) in a Black-Scholes setting on a non-dividend paying asset. Here, we undertake a similar analysis for the perpetua...

  18. Assessment of Wetland Valuation Processes for Compensation in ...

    African Journals Online (AJOL)

    The issue of compensation has been debated in various fora; however compensation on wetland resources has not been given the primary place. Wetland valuation like any other type of valuation requires going through stages, which may be more complex than real estate valuation for compensation. This study therefore ...

  19. Real options and volume uncertainty by field development projects

    International Nuclear Information System (INIS)

    Ekern, S.; Stensland, G.

    1993-12-01

    The report concerns a study on the use of option methodology in field development projects. The report shows how the value of flexibility in the different decision processes is to be found by means of real option methodology. Particular attention is laid on the uncertainty concerning the volume of reserves and production capacity. The results from the study were based on the research project dubbed ''Use of real options in field development projects''. The project is partially connected to another project dubbed ''Decisive behaviour and alternative action under uncertainty in the petroleum sector''. Main topics cover as follow: Example with volume uncertainty; real options and volume uncertainty; gradual disclosure of uncertainty in the production; value of flexible production equipment. 33 refs., 19 figs., 17 tabs

  20. Euro Membership as a Real Option Trigger

    DEFF Research Database (Denmark)

    Aabo, Tom; Pantzalis, Christos

    2007-01-01

    -adopters (UK, Sweden, and Denmark) to exercise various forms of real options such as to establish alliances / partnerships, to enter new markets / market segments, to switch suppliers, and to generally expand in the Euro-area. The study furthermore shows that small, profitable and financially constrained firms...... are particularly likely to exercise such real options triggered by the introduction of the Euro. The results go beyond the immediate trade effects, which empirical studies have shown to be weak and without trade diversion as to the three non-adopters, and provide important insights about the potential long...

  1. Valuing of research project in energy field with real options

    International Nuclear Information System (INIS)

    De Blasio, N.; Marzo, G.; Turatto, R.

    2008-01-01

    This article presents an application of real options theory for valuing a research project in the field of stranded gas valorisation. After a presentation of the theory, the analysis addresses the use of real options evaluation for generating alternative pathways in order to add new value to the R D projects. It also shows how real option approach may be important for selecting among competitive projects, but also for providing a system for valorisation of decision-maker flexibility [it

  2. Real Options Valuation of U.S. Federal Renewable Energy Research,Development, Demonstration, and Deployment

    Energy Technology Data Exchange (ETDEWEB)

    Siddiqui, Afzal S.; Marnay, Chris; Wiser, Ryan H.

    2005-03-01

    Benefits analysis of US Federal government funded research, development, demonstration, and deployment (RD3) programs for renewable energy (RE) technology improvement typically employs a deterministic forecast of the cost and performance of renewable and nonrenewable fuels. The benefits estimate for a program derives from the difference between two forecasts, with and without the RD3 in place. The deficiencies of the current approach are threefold: (1) it does not consider uncertainty in the cost of non-renewable energy (NRE), and the option or insurance value of deploying RE if and when NRE costs rise; (2) it does not consider the ability of the RD3 manager to adjust the RD3 effort to suit the evolving state of the world, and the option value of this flexibility; and (3) it does not consider the underlying technical risk associated with RD3, and the impact of that risk on the programs optimal level of RD3 effort. In this paper, a rudimentary approach to determining the option value of publicly funded RE RD3 is developed. The approach seeks to tackle the first deficiency noted above by providing an estimate of the options benefit of an RE RD3 program in a future with uncertain NRE costs.While limited by severe assumptions, a computable lattice of options values reveals the economic intuition underlying the decision-making process. An illustrative example indicates how options expose both the insurance and timing values inherent in a simplified RE RD3 program that coarsely approximates the aggregation of current Federal RE RD3.This paper also discusses the severe limitations of this initial approach, and identifies needed model improvements before the approach can adequately respond to the RE RD3 analysis challenge.

  3. Prepayment and the Valuation of Danish Mortgage-Backed Bonds

    DEFF Research Database (Denmark)

    Jakobsen, Svend

    Ph.D. thesis on prepayment modelling and valuation of Danish mortgage backed bonds. The thesis discusses several aspects of mortgage backed bonds including after-tax valuation, the special Danish delivery option, rational prepayment behavior, transaction costs and heterogenous borrowers. The thes...... concludes with an empirical analysis of pricing and holding period returns...

  4. Multinationality as real option facilitator – Illusion or reality?

    DEFF Research Database (Denmark)

    Aabo, Tom; Pantzalis, Christos; Park, Jung Chul

    2016-01-01

    Previous literature provides multiple conflicting arguments on why and when multinationality should enhance or impede the value-relevance of firms’ real options. We address this issue by examining whether the relationship between stock returns and changes in return volatility varies with multinat......Previous literature provides multiple conflicting arguments on why and when multinationality should enhance or impede the value-relevance of firms’ real options. We address this issue by examining whether the relationship between stock returns and changes in return volatility varies...... with multinationality. Our results indicate that multinationality does indeed act as a real option facilitator. Furthermore, we show that, consistent with the notion that there are limits to the operating flexibility associated with multinationality this benefit only accrues fully if the firm is not financially...

  5. The research for flexible product family manufacturing based on real options

    Directory of Open Access Journals (Sweden)

    Maozhu Jin

    2015-01-01

    Full Text Available Purpose: The goal of this paper is to find the best production strategy for product mix, which means the largest value of the options. And finally, give a case and find the solution of the optimal production strategy for product mix. Design/methodology/approach: This article, based on the production with characteristics of a call option and 0-1 integer programming model, build new-products mix strategy, and through case demonstrate that traditional method underestimates the value of the products mix. Finding: According to market being volatility and uncertainty and the production can being delayed, firms can flexibly arrange the best time for products to manufacture. Use real options theory to analyze product decision and the best production timing decision. Find the total options value is higher than the traditional methods. Research limitations/implications: We are not applied to real option pricing theory in modular flexible production system. We just applied real option pricing theory to the product platform. The basic model needs to improve. While the thinking of this paper provides some research ideas for flexible production systems based on real option in further research. Practical Implications: The introduction of the real option make the company can achieve dynamic planning and flexible management for production of products mix and get the better benefit. Originality/value: The central contribution of this paper is to introduce the option mechanism in the production timing for the product mix.

  6. STRATEGIC EXERCISE OF REAL OPTIONS:INVESTMENT DECISIONS IN TECHNOLOGICAL SYSTEMS

    Institute of Scientific and Technical Information of China (English)

    Kevin ZHU; John WEYANT

    2003-01-01

    Viewing investment projects in new technologies as real options, this paper studies the effects of endogenous competition and asymmetric information on the strategic exercise of real options. We first develop a multi-period, game-theoretic model and show how competition leads to early exercise and aggressive investment behaviors and how competition erodes option values. We then relax the typical full-information assumption found in the literature and allow information asymmetry to exist across firms. Our model shows, in contrast to the literature that payoff is independent of the ordering of exercise, that the sequential exercise of real options may generate both informational and payoff externalities. We also find some surprising but interesting results such as having more information is not necessarily better.

  7. VALUATION AND INVESTMENT PROFESSION

    Directory of Open Access Journals (Sweden)

    Lidija Dedi

    2013-06-01

    Full Text Available Investment professionals, particularly financial analysts or security analysts evaluate securities and try to determine characteristics of securities and to identify mispriced securities. For that purpose they use different models to estimate the intrinsic value of the common stocks. Traditional valuation models based on the present value of future cash flows are affected by estimated growth rate of the variable used and by the investor’s required rate of return. These models can be used for valuing fixed income securities, such as bonds and preferred stocks. However, in valuing companies with significant growth opportunities they have to expand traditional analysis with option valuation.

  8. Valuation of common and preferred stocks

    Directory of Open Access Journals (Sweden)

    Nikolić Ljubica

    2014-01-01

    Full Text Available Buying stocks is a modern way of investing. The investors may place the available capital on the domestic and foreign stock market, they may buy more stocks of a single issuer or distribute money to purchase stocks of various public (stock-exchange companies, and they may form a portfolio of various securities. The investors' decisions on these options are based on their estimate on returns and risks underlying individual security instruments (securities. The two basic approaches to valuation of common stocks are: the Present Value Approach (method of valuating the capitalization of income and the P/E Ratio Approach (the method of valuating the multiple of per-share earnings. Instead of viewing these methods as competing alternatives, they should better be viewed as mutually complementary methods. Both methods are equally useful and their concurrent use may provide better grounds for the analysts' valuation of stocks.

  9. Real Option Cost Vulnerability Analysis of Electrical Infrastructure

    Science.gov (United States)

    Prime, Thomas; Knight, Phil

    2015-04-01

    Critical infrastructure such as electricity substations are vulnerable to various geo-hazards that arise from climate change. These geo-hazards range from increased vegetation growth to increased temperatures and flood inundation. Of all the identified geo-hazards, coastal flooding has the greatest impact, but to date has had a low probability of occurring. However, in the face of climate change, coastal flooding is likely to occur more often due to extreme water levels being experienced more frequently due to sea-level rise (SLR). Knowing what impact coastal flooding will have now and in the future on critical infrastructure such as electrical substations is important for long-term management. Using a flood inundation model, present day and future flood events have been simulated, from 1 in 1 year events up to 1 in 10,000 year events. The modelling makes an integrated assessment of impact by using sea-level and surge to simulate a storm tide. The geographical area the model covers is part of the Northwest UK coastline with a range of urban and rural areas. The ensemble of flood maps generated allows the identification of critical infrastructure exposed to coastal flooding. Vulnerability has be assessed using an Estimated Annual Damage (EAD) value. Sampling SLR annual probability distributions produces a projected "pathway" for SLR up to 2100. EAD is then calculated using a relationship derived from the flood model. Repeating the sampling process allows a distribution of EAD up to 2100 to be produced. These values are discounted to present day values using an appropriate discount rate. If the cost of building and maintain defences is also removed from this a Net Present Value (NPV) of building the defences can be calculated. This distribution of NPV can be used as part of a cost modelling process involving Real Options, A real option is the right but not obligation to undertake investment decisions. In terms of investment in critical infrastructure resilience this

  10. Separate valuation subsystems for delay and effort decision costs.

    Science.gov (United States)

    Prévost, Charlotte; Pessiglione, Mathias; Météreau, Elise; Cléry-Melin, Marie-Laure; Dreher, Jean-Claude

    2010-10-20

    Decision making consists of choosing among available options on the basis of a valuation of their potential costs and benefits. Most theoretical models of decision making in behavioral economics, psychology, and computer science propose that the desirability of outcomes expected from alternative options can be quantified by utility functions. These utility functions allow a decision maker to assign subjective values to each option under consideration by weighting the likely benefits and costs resulting from an action and to select the one with the highest subjective value. Here, we used model-based neuroimaging to test whether the human brain uses separate valuation systems for rewards (erotic stimuli) associated with different types of costs, namely, delay and effort. We show that humans devalue rewards associated with physical effort in a strikingly similar fashion to those they devalue that are associated with delays, and that a single computational model derived from economics theory can account for the behavior observed in both delay discounting and effort discounting. However, our neuroimaging data reveal that the human brain uses distinct valuation subsystems for different types of costs, reflecting in opposite fashion delayed reward and future energetic expenses. The ventral striatum and the ventromedial prefrontal cortex represent the increasing subjective value of delayed rewards, whereas a distinct network, composed of the anterior cingulate cortex and the anterior insula, represent the decreasing value of the effortful option, coding the expected expense of energy. Together, these data demonstrate that the valuation processes underlying different types of costs can be fractionated at the cerebral level.

  11. The ecological rationality of state-dependent valuation.

    Science.gov (United States)

    McNamara, J M; Trimmer, P C; Houston, A I

    2012-01-01

    Laboratory studies on a range of animals have identified a bias that seems to violate basic principles of rational behavior: a preference is shown for feeding options that previously provided food when reserves were low, even though another option had been found to give the same reward with less delay. The bias presents a challenge to normative models of decision making (which only take account of expected rewards and the state of the animal at the decision time). To understand the behavior, we take a broad ecological perspective and consider how valuation mechanisms evolve when the best action depends upon the environment being faced. We show that in a changing and uncertain environment, state-dependent valuation can be favored by natural selection: Individuals should allow their hunger to affect learning for future decisions. The valuation mechanism that typically evolves produces the kind of behavior seen in standard laboratory tests. By providing an insight into why learning should be affected by the state of an individual, we provide a basis for understanding psychological principles in terms of an animal's ecology.

  12. On pricing futures options on random binomial tree

    International Nuclear Information System (INIS)

    Bayram, Kamola; Ganikhodjaev, Nasir

    2013-01-01

    The discrete-time approach to real option valuation has typically been implemented in the finance literature using a binomial tree framework. Instead we develop a new model by randomizing the environment and call such model a random binomial tree. Whereas the usual model has only one environment (u, d) where the price of underlying asset can move by u times up and d times down, and pair (u, d) is constant over the life of the underlying asset, in our new model the underlying security is moving in two environments namely (u 1 , d 1 ) and (u 2 , d 2 ). Thus we obtain two volatilities σ 1 and σ 2 . This new approach enables calculations reflecting the real market since it consider the two states of market normal and extra ordinal. In this paper we define and study Futures options for such models.

  13. 26 CFR 1.430(g)-1 - Valuation date and valuation of plan assets.

    Science.gov (United States)

    2010-04-01

    ... the adjusted fair market value of plan assets, assets that are added to a plan as a result of a plan... (CONTINUED) INCOME TAX (CONTINUED) INCOME TAXES Certain Stock Options § 1.430(g)-1 Valuation date and.... Paragraph (c) of this section describes rules regarding the determination of the asset value for purposes of...

  14. Economic Evaluation for Energy Business Using Real Options Pricing Method

    Energy Technology Data Exchange (ETDEWEB)

    Yun, W.C. [Korea Energy Economics Institute, Euiwang (Korea)

    2001-11-01

    Recently, facing the new era of restructuring, privatization, and liberalization the energy industry in the world is changing rapidly, and thus the uncertain factors tend to increase. This would imply that energy-related business is now confronted with new market risks as well as the simple price risks. The traditional investment valuation method using the concept of net present value (NPV) or internal rate of revenue (IRR) might not incorporate the managerial alternatives which enable managers to respond flexibly to the changes in business environment. This study pointed out the problems of the traditional discounted cash flow (DCF) method when evaluating a certain capital investment in energy industry. As an alternative, the real option pricing method (ROPM) was proposed, which is widely adopted in the field of profit projection for the venture business. In addition, when applying to energy sector the feasibility of ROPM was discussed, and the frameworks and major results of previous related studies were described. For those using the ROPM in real business, I explained the detailed procedures and solutions of ROPM, and introduced the log-transformed binomial model which provides a more efficient solution. In order to verify the usefulness of the ROPM, this study performed an empirical analysis for a virtual construction and operation project of power plant. And, the results from the ROPM was compared to those from the traditional DCF method. Based on the empirical results, the values of various investment opportunities were shown to be high. Therefore, the project not justified in terms of traditional DCF would turn into the project with a positive gross project value, properly reflecting managerial flexibilities inherent in the original project. (author). 58 refs., 32 figs., 33 tabs.

  15. Towards an International Data Standard for Immovable Property Valuation

    NARCIS (Netherlands)

    Kara, A.; Çağdaş, Volkan; Işıkdağ, Ümit; van Oosterom, P.J.M.; Lemmen, Christiaan; Stubkjær, Erik; Halme, Pekka

    2017-01-01

    Immovable property valuation is performed by public sector actors for several land management activities, such as property taxation, expropriation or compulsory purchase of land, land re-adjustment and land consolidation; and private sector actors perform valuation for purchase, real estate

  16. Using a spark-spread valuation to investigate the impact of corn-gasoline correlation on ethanol plant valuation

    International Nuclear Information System (INIS)

    Kirby, Natasha; Davison, Matt

    2010-01-01

    Corn ethanol plants have been criticized for a number of reasons in recent years. This paper provides another ground for criticizing these plants. Historical corn and gasoline prices are uncorrelated, but widespread adoption of corn ethanol production might reasonably lead to future correlation between these prices. We present a real options - like valuation of an ethanol plant as a spark spread between the corn price and the gasoline price. This analysis shows that the value of an ethanol plant monotonically decreases with increasing correlation and the optimal production schedule greatly depends on the correlation. Even relatively small new correlations can result in a significant proportional value decrease; a 50% correlation between corn and gasoline causes ethanol plants to lose 10% of their value. The limiting case of full correlation would lead to a 30% value loss. (author)

  17. 无穷等比数列在房地产估价中的广泛应用%Application of Infinite geometric series in the real estate valuation

    Institute of Scientific and Technical Information of China (English)

    龚光剑

    2011-01-01

    Infinite geometric series is more widely applied in real estate valuation. Mastering the infinite geometric series as a mathematical tool is essential to the development of real estate valuation techniques.%在房地产估价中,无穷等比数列的应用更为广泛,掌握了无穷等比数列这一数学工具,对房地产估价技术的开展至关重要。

  18. CORPORATE VALUATION USING TWO-DIMENSIONAL MONTE CARLO SIMULATION

    Directory of Open Access Journals (Sweden)

    Toth Reka

    2010-12-01

    Full Text Available In this paper, we have presented a corporate valuation model. The model combine several valuation methods in order to get more accurate results. To determine the corporate asset value we have used the Gordon-like two-stage asset valuation model based on the calculation of the free cash flow to the firm. We have used the free cash flow to the firm to determine the corporate market value, which was calculated with use of the Black-Scholes option pricing model in frame of the two-dimensional Monte Carlo simulation method. The combined model and the use of the two-dimensional simulation model provides a better opportunity for the corporate value estimation.

  19. The Early Exercise Premium Representation for American Options on Multiply Assets

    International Nuclear Information System (INIS)

    Klimsiak, Tomasz; Rozkosz, Andrzej

    2016-01-01

    In the paper we consider the problem of valuation of American options written on dividend-paying assets whose price dynamics follow the classical multidimensional Black and Scholes model. We provide a general early exercise premium representation formula for options with payoff functions which are convex or satisfy mild regularity assumptions. Examples include index options, spread options, call on max options, put on min options, multiply strike options and power-product options. In the proof of the formula we exploit close connections between the optimal stopping problems associated with valuation of American options, obstacle problems and reflected backward stochastic differential equations

  20. Valoración de proyectos mineros en el Perú mediante el enfoque de opciones reales

    OpenAIRE

    Agüero Olivos, Carlos Eduardo

    2015-01-01

    The evaluation of an investment project in the mining sector in Peru, is made the traditional way, using the method of Discounted Cash Flow (DCF), with the consequence obtain estimates of valuation not necessarily close to reality. The DCF does not take into account various opportunities that might occur in the project over time, by the following simple reason: it assumes that all estimates today, certain assumptions occur in the future. The real options method is more flexible valuation m...

  1. GASIFICACIÓN DE CARBÓN PARA GENERACIÓN DE ENERGÍA ELÉCTRICA: ANÁLISIS CON VALORACIÓN DE OPCIONES REALES COAL GASIFICATION FOR POWER GENERATION: ANALYSIS WITH REAL OPTIONS VALUATION

    Directory of Open Access Journals (Sweden)

    Alejandro Concha A

    2009-12-01

    Full Text Available Se evalúa económicamente la utilización de la tecnología de gasificación de carbón en la generación de energía eléctrica, utilizando información secundaria y el enfoque de valoración de opciones reales mediante árboles binomiales de 2 variables. Se analiza el caso de adaptar una central existente de gas natural de ciclo combinado (NGCC para la utilización de syngas a partir de carbón; en un segundo caso, se evalúa la instalación de una nueva central termoeléctrica de carbón pulverizado (PC o alternativamente una central de gasificación de carbón integrada a ciclo combinado (IGCC. En este último caso, se evalúa la opción de "switching" de combustible. Para los precios de los combustibles se emplean modelos de Movimiento Browniano Geométrico No Homogéneo (IGBM y en ambos casos estudiados se analiza en 2 escenarios de precios, incluyendo análisis de sensibilidad. Respecto al primer caso, la adaptación a syngas de una planta NGCC es conveniente económicamente, teniendo el proyecto una alta sensibilidad respecto a la eficiencia. La sensibilidad a la inversión no es significativa, como tampoco a los gastos de operación. Respecto al segundo caso, la conveniencia económica de la planta IGCC frente a la planta PC no es clara en los escenarios de precios considerados. Pero analizada en diversas combinaciones de precios, la planta IGCC de operación flexible alternando dos combustibles puede lograr ventajas económicas. Respecto a la sensibilidad, se repiten las conclusiones mencionadas para el primer caso.The use of coal gasification technology in the generation of electric power is evaluated economically. Secondary information and valuation of real options approach is used, with two variables binomial lattices. First, the retrofit of an existing natural gas combined cycle plant (NGCC for the utilization of syngas from coal is analyzed; on the second case, an economical evaluation is realized for to compare a new Pulverized

  2. Solar PV leasing in Singapore: enhancing return on investments with options

    Science.gov (United States)

    Song, Shuang; Poh, K. L.

    2017-05-01

    Renewable energy is getting more important nowadays as an alternative to traditional energies. Solar energy, according to Energy Market Authority, is the most viable in the context of Singapore compared to other renewable energy sources due to land constraints. In light of the increasing adoption of solar power in Singapore, this paper focuses on solar PV leasing using a case study. This paper assesses the prospect for solar PV leasing companies in Singapore through the lens of embedded real options. The recent news that solar power is becoming the cheapest form of new electricity presents the leasing company an option to expand the scale of solar PV system. Taking into account this option, the Net Present Value (NPV) of the investment increased significantly compared to the case without real options. Technological developments result in a continuously changing environment with uncertainties. Thus, decision makers need to be aware of the inherent risk associated and identify options to maximize NPV. This upside potential is realized by exercising the managerial flexibility and exploiting the uncertainty. The paper enables solar energy planners to consider possible managerial flexibilities under uncertainties, showing how option thinking can be incorporated in the valuation of solar energy.

  3. A DG approach to the numerical solution of the Stein-Stein stochastic volatility option pricing model

    Science.gov (United States)

    Hozman, J.; Tichý, T.

    2017-12-01

    Stochastic volatility models enable to capture the real world features of the options better than the classical Black-Scholes treatment. Here we focus on pricing of European-style options under the Stein-Stein stochastic volatility model when the option value depends on the time, on the price of the underlying asset and on the volatility as a function of a mean reverting Orstein-Uhlenbeck process. A standard mathematical approach to this model leads to the non-stationary second-order degenerate partial differential equation of two spatial variables completed by the system of boundary and terminal conditions. In order to improve the numerical valuation process for a such pricing equation, we propose a numerical technique based on the discontinuous Galerkin method and the Crank-Nicolson scheme. Finally, reference numerical experiments on real market data illustrate comprehensive empirical findings on options with stochastic volatility.

  4. IMPLEMENTATION OF CORPORATE VALUATION TECHNIQUES IN PRACTICE

    Directory of Open Access Journals (Sweden)

    Kiss Anita

    2015-07-01

    Full Text Available This paper focuses on the main tools and techniques of firm valuation. One of the objectives in this paper is to present the reasons for such differences in value across different models, and to help in choosing the right model for a specific task. In today's management literature there are a lot of evaluation models, which based on the different approaches. The most important dimensions in the evaluation are the past performance analysis, the current value of the firm based on the forecast period and the appraisal of future opportunities. Nowadays it is quite problematic that these concepts regarding the valuation methods used in practice are not homogeneous. In view of the major principles is equal, but the details are different. In this paper my goal is to categorize the methods in the right section and to demonstrate the characteristics, advantages and disadvantages as well. This study proceeds as follow. The first section classifies and categorizes the different valuation approaches, which are the ratios based on accounting data, the asset-based approach, the income-based approach within the discounted cash flow models and the value added methods, the relative valuation, at last the real options. The second part presents the main features and implementation of the methods. Finally, the third section concludes what might be learned from this study. Based on the related literature reviewed and my previous researches I conclude that, in the evaluation, the problem is not that there are not enough models to complete the task but on the contrary, the selection of the appropriate model is the first challenge in the work. The different approaches lead to significantly different values. The other main finding of this work that, professionals involved in the assessment task explained the reason for the differences, and selection the correct model which is the best fit for the job. Considering the models described below a best model cannot be

  5. Analiza postojećeg stanja i potrebe razvoja sistema za procjenu vrijednosti nekretnina u Republici Srbiji : Analysis of actual status and needs for real estate valuation model development in Republic of Serbia

    Directory of Open Access Journals (Sweden)

    Branko Božić

    2016-12-01

    Full Text Available U radu je opisano stanje u oblasti razvoja tzržišta nekretnina u Republici Srbiji, sadašnji nosioci poslova procjene, neki primeri dobre prakse u Evropi i međunarodne organizacije koje tu oblast uređuju. Na kraju, na bazi analize pojedinih sistema vrednovanja u nekim evropskim državama, dat je prijedlog buduće organizacije,a koji je ujedno zasnovan i na specifičnostima u Republici Srbiji. : This article points out to real estate market in Republic of Serbia and main actors at the process of real estate valuation. Some international organizations at the area of property valuation were explaned, also. At the end releting to the good practice of some EU valuation systems, a proposal for new valuation system at the Republic of Serbia was explaned.

  6. Carbon Sequestration in Forest Valuation

    Directory of Open Access Journals (Sweden)

    Kazak Jan

    2016-03-01

    Full Text Available Strong links between the condition of the environment and the economy have recently resulted in a number of actions aiming to implement environmental considerations in economic calculations. This is accompanied by the development of the concept of ecosystem services, characterizing the benefits that the environment provides humankind with. The identification of these services is reflected in their economic values. Hence, the concept of the valuation of ecosystem services. Therefore, if the service provided by the environment takes on a financial value, we can consider it as income from the property containing the analyzed ecosystem. Of course, in order to speak in practice of the income approach in the valuation of such properties, there must be actual financial flow as income for the real estate owner. However, in the era of big economic changes and the implementation of a number of financial instruments (e.g., subsidies for a particular use of property, trade of CO2 emission rights, it seems reasonable to consider the possibility of property valuation by the valuation of ecosystem services.

  7. Valuation anomalies for interconnector transmission rights

    International Nuclear Information System (INIS)

    McInerney, Celine; Bunn, Derek

    2013-01-01

    Whilst the acquisition of physical transmission interconnector rights between two or more electricity markets can be structured as spread options on the spot prices of electricity between connected markets, empirical evidence suggests that actual prices may be quite different. This raises issues for the valuation of transmission rights, particularly in the European context of market harmonisation, and the use of transmission rights with increasing levels of wind penetration. We examine the price differentials between the Irish and British electricity markets, where explicit transmission capacity auctions have been persistently undersubscribed and transmission rights acquired but not fully utilised. We find significant empirical indications that auction prices for transmission rights are undervalued against both arbitrage and spread option valuations. We also find significant power flows against the efficient price spread direction. A survey of a group of experts with an interest in trading power between Ireland and Britain inform a number of possible explanations for the apparent inefficiencies. These include ex-post pricing in the Irish market, intermittent wind and strategic behaviour by dominant firms. - Highlights: ► Valuation anomalies for transmission rights highlight lack of market integration. ► Exports constrained from market with ex post pricing and no hedging mechanisms. ► High start-up costs for balancing plant may deter exports from high wind regions. ► Deadband created by capacity payments based on flows versus availability

  8. An Estimation of Profitability of Investment Projects in The Oil and Gas Industry Using Real Options Theory / Ocena Opłacalności Projektów Inwestycyjnych W Przemyśle Naftowym Z Wykorzystaniem Teorii Opcji Realnych

    Science.gov (United States)

    Kosowski, Piotr; Stopa, Jerzy

    2012-11-01

    Paper discusses issues relating to the valuation of investment efficiency in the oil and gas industry using a real options theory. The example of investment pricing using real options was depicted and it was confronted with the analysis executed with the use of traditional methods. Indicators commonly used to evaluate profitability of investment projects, based on a discounted cash flow method, have a few significant drawbacks, the most meaningful of which is staticity which means that any changes resulting from a decision process during the time of investment cannot be taken into consideration. In accordance with a methodology that is currently used, investment projects are analysed in a way that all the key decisions are made at the beginning and are irreversible. This approach assumes, that all the cash flows are specified and does not let the fact that during the time of investment there may appear new information, which could change its original form. What is also not analysed is the possibility of readjustment, due to staff managment's decisions, to the current market conditions, by expanding, speeding up/slowing down, abandoning or changing an outline of the undertaking. In result, traditional methods of investment projects valuation may lead to taking wrong decisions, e.g. giving up an owned exploitation licence or untimely liquidation of boreholes, which seem to be unprofitable. Due to all the above-mentioned there appears the necessity of finding some other methods which would let one make real and adequate estimations about investments in a petroleum industry especially when it comes to unconventional resources extraction. One of the methods which has been recently getting more and more approval in a world petroleum economics, is a real options pricing method. A real option is a right (but not an obligation) to make a decision connected with an investment in a specified time or time interval. According to the method a static model of pricing using DCF is

  9. Fourier and wavelet option pricing methods

    NARCIS (Netherlands)

    S.C. Maree (Stef); L. Ortiz Gracia (Luis); C.W. Oosterlee (Cornelis); M.A.H. Dempster; J. Kanniainen (Juho); J. Keane (John); E. Vynckier (Erik)

    2018-01-01

    textabstractIn this overview chapter, we will discuss the use of exponentially converging option pricing techniques for option valuation. We will focus on the pricing of European options, and they are the basic instruments within a calibration procedure when fitting the parameters in asset dynamics.

  10. Acquisitions and Real Options : The Greenfield Alternative

    NARCIS (Netherlands)

    Brouthers, Keith D.; Dikova, Desislava

    P>Although acquisitions are a popular way to enter new markets, empirical evidence tends to indicate few benefits accrue to acquiring firms. This might be the case because firms use acquisitions when they should be employing an alternative mode of expansion. Applying real options theory to this

  11. The application of sustainable development principles to the theory and practice of property valuation

    OpenAIRE

    Lorenz, David Philipp

    2006-01-01

    This dissertation is an exploration into the fields of sustainable development, property investment and valuation. It investigates the rationale for immediately and rigorously integrating sustainability issues into property valuation theory and practice and proposes theoretical and practical options for valuers on how to address sustainability issues within valuation reports. It is argued that the perception of property as a commodity is changing to emphasize sustainable design features and p...

  12. Normalized value coding explains dynamic adaptation in the human valuation process.

    Science.gov (United States)

    Khaw, Mel W; Glimcher, Paul W; Louie, Kenway

    2017-11-28

    The notion of subjective value is central to choice theories in ecology, economics, and psychology, serving as an integrated decision variable by which options are compared. Subjective value is often assumed to be an absolute quantity, determined in a static manner by the properties of an individual option. Recent neurobiological studies, however, have shown that neural value coding dynamically adapts to the statistics of the recent reward environment, introducing an intrinsic temporal context dependence into the neural representation of value. Whether valuation exhibits this kind of dynamic adaptation at the behavioral level is unknown. Here, we show that the valuation process in human subjects adapts to the history of previous values, with current valuations varying inversely with the average value of recently observed items. The dynamics of this adaptive valuation are captured by divisive normalization, linking these temporal context effects to spatial context effects in decision making as well as spatial and temporal context effects in perception. These findings suggest that adaptation is a universal feature of neural information processing and offer a unifying explanation for contextual phenomena in fields ranging from visual psychophysics to economic choice.

  13. Corporate investment under uncertainty and competition : A real options approach

    NARCIS (Netherlands)

    Pawlina, G.

    2003-01-01

    Corporate investment opportunities can be represented as a set of (real) options to acquire productive assets. Identification of the optimal exercise strategies for these options plays a crucial role in improving the quality of capital budgeting decisions and, as a consequence, in maximizing

  14. Closed-form pricing formula for exchange option with credit risk

    International Nuclear Information System (INIS)

    Kim, Geonwoo; Koo, Eunho

    2016-01-01

    In this paper, we study the valuation of Exchange option with credit risk. Since the over-the-counter (OTC) markets have grown rapidly in size, the counterparty default risk is very important and should be considered for the valuation of options. For modeling of credit risk, we use the structural model of Klein [13]. We derive the closed-form pricing formula for the price of the Exchange option with credit risk via the Mellin transform and provide the experiment results to illustrate the important properties of option with numerical graphs.

  15. Application of monetary valuation in Life Cycle Assessment

    DEFF Research Database (Denmark)

    Weidema, Bo Pedersen; Pizzol, Massimo; Miguel, Brandão

    Monetary valuation, or monetarisation, is the determination of the economic value of non-market goods, i.e. goods for which no market exists. Although monetary valuation has a great potential to be applied in Life Cycle Assessment (LCA), in particular in the weighting phase, several challenges...... for LCA. For the two surveys, the total number of respondents was 209. The critial review showed that observed- and revealed-preference methods and the abatement cost method have limited applicability in LCA, whereas the conjoint analysis method and the budget constraint method are the best options...

  16. Asymmetric Exchange Rate Exposures: A Search for the Effect of Real Options

    DEFF Research Database (Denmark)

    Aabo, Tom

    2001-01-01

    Real options like the ability to reallocate production resources can lead to an asymmetric exchange rate exposure. Using a stock market approach in which the exchange rate exposure is derived from the information content in the stock prices this study examines the extra-market exchange rate...... exposures of a group of blue chip, industrial companies listed on the Copenhagen Stock Exchange. In these companies the existence of real options is an integrated part of the exchange rate exposure management process. The result of the stock market approach is mixed. Statistically significant asymmetric...... exchange rate exposures are identified successfully but the asymmetries can only to a limited extent be explained by the existence of real options. Financial options and pricing to market are competing explanations. Omitted variable bias further blurs the picture. These problems and the concept of path...

  17. The Optimal Timing of Strategic Action – A Real Options Approach

    Directory of Open Access Journals (Sweden)

    Gordon G. Sollars

    2012-01-01

    Full Text Available he possibility of a first-mover advantage arises in a variety of strategic choices, including product introductions, business start-ups, and mergers and acquisitions. The strategic management literature reflects ambiguity regarding the likelihood that a first mover can or will capture additional value. This paper uses a real options approach to address the optimal timing of strategic moves. Previous studies have modeled real options using either a perpetual or a European financial option. With these models, a strategic choice could only be made either without respect to a time frame (perpetual or at a fixed point in time (European option. Neither case is realistic. Companies typically have strategic options with only a limited time frame due to market factors, but companies may choose to act at any time within that constraint. To reflect this reality, we adapt a method for valuing an American financial option on a dividend paying stock to the real options context. The method presented in this paper proposes a solution for the optimum value for a project that should trigger a strategic choice, and highlights the value lost by not acting optimally. We use simulation results to show that the time frame available to make a strategic choice has an important effect on both the project value for when action should be taken, as well as on the value of waiting to invest at the optimal time. The results presented in this paper help to clarify the ambiguity that is found in the strategic management literature regarding the possibility of obtaining a first-mover advantage. Indeed, a first mover that acts sub-optimally could incur losses or at least not gain any advantage. A first mover that waits to invest at the right time based on the superior information supplied by models based on real options could be better positioned to obtain the benefits that might come from the first move.

  18. Valuation of marginal CO2 abatement options for electric power plants in Korea

    International Nuclear Information System (INIS)

    Park, Hojeong; Lim, Jaekyu

    2009-01-01

    The electricity generation sector in Korea is under pressure to mitigate greenhouse gases as directed by the Kyoto Protocol. The principal compliance options for power companies under the cap-and-trade include the application of direct CO 2 emission abatement and the procurement of emission allowances. The objective of this paper is to provide an analytical framework for assessing the cost-effectiveness of these options. We attempt to derive the marginal abatement cost for CO 2 using the output distance function and analyze the relative advantages of emission allowance procurement option as compared to direct abatement option. Real-option approach is adopted to incorporate emission allowance price uncertainty. Empirical result shows the marginal abatement cost with an average of Euro 14.04/ton CO 2 for fossil-fueled power plants and confirms the existence of substantial cost heterogeneity among plants which is sufficient to achieve trading gains in allowance market. The comparison of two options enables us to identify the optimal position of the compliance for each plant. Sensitivity analyses are also presented with regard to several key parameters including the initial allowance prices and interest rate. The result of this paper may help Korean power plants to prepare for upcoming regulations targeted toward the reduction of domestic greenhouse gases.

  19. Valuation Bases and Accounting System Entries in Financial Analysis of the Municipal Real Property

    Directory of Open Access Journals (Sweden)

    Daniela Feschiyan

    2013-08-01

    Full Text Available The paper introduces a conceptual framework for an accounting of the municipal real property, and defines a respective system of indicators. The development of this framework is seen as an important prerequisite for the efficient property management. It aims to overcome the lack or poor accessibility of the information, and thus to ensure the successful municipal real property management in a strategic context. The developing of the applied approach implies that accounting indicators are divided into three main groups – values, revenues, and costs. Beside the above mentioned classification, the municipal revenues and costs are classified also as existing and proposed. The existing indicators are defined by International Accounting Standards in public sector, and some of them are considered as being appropriate for the inclusion in the financial analysis as accounting system entries. The proposed indicators are perceived as appropriate to carry out a detailed analysis of the municipal property at a lower level of desegregations. The first two paragraphs explain the main bases for the municipal property valuation - historical cost, current price, market value, present value, with a special emphasis on the use of the historical value, and the types of valuation respectively. The next three paragraphs are concentrated mainly on the accounting indicators for the municipal property assessment. The sixth paragraph represents several major accounting bases - an accounting value, a carrying value, a market value, an accumulated depreciation, revenues from the sale of assets and services, costs by economic elements, revenues from future periods and costs for future periods, and revenues from other events and costs for other events. The seventh section presents a brief comparative analysis of accounting systems of 6 municipalities in South-Eastern Europe and the last paragraph highlights the identified “good practices”.

  20. Applying real options analysis to assess cleaner energy development strategies

    International Nuclear Information System (INIS)

    Cheng, Ching-Tsung; Lo, Shang-Lien; Lin, Tyrone T.

    2011-01-01

    The energy industry, accounts for the largest portion of CO 2 emissions, is facing the issue of compliance with the national clean energy policy. The methodology for evaluating the energy mix policy is crucial because of the characteristics of lead time embedded with the power generation facilities investment and the uncertainty of future electricity demand. In this paper, a modified binomial model based on sequential compound options, which may account for the lead time and uncertainty as a whole is established, and a numerical example on evaluating the optional strategies and the strategic value of the cleaner energy policy is also presented. It is found that the optimal decision at some nodes in the binomial tree is path dependent, which is different from the standard sequential compound option model with lead time or time lag concept. The proposed modified binomial sequential compound real options model can be generalized and extensively applied to solve the general decision problems that deal with the long lead time of many government policies as well as capital intensive investments. - Highlights: → Introducing a flexible strategic management approach for government policy making. → Developing a modified binomial real options model based on sequential compound options. → Proposing an innovative model for managing the long term policy with lead time. → Applying to evaluate the options of various scenarios of cleaner energy strategies.

  1. Option-implied term structures

    OpenAIRE

    Vogt, Erik

    2014-01-01

    The illiquidity of long-maturity options has made it difficult to study the term structures of option spanning portfolios. This paper proposes a new estimation and inference framework for these option-implied term structures that addresses long-maturity illiquidity. By building a sieve estimator around the risk-neutral valuation equation, the framework theoretically justifies (fat-tailed) extrapolations beyond truncated strikes and between observed maturities while remaining nonparametric. Ne...

  2. Pricing Vulnerable Options with Market Prices of Common Jump Risks under Regime-Switching Models

    Directory of Open Access Journals (Sweden)

    Miao Han

    2018-01-01

    Full Text Available This paper investigates the valuation of vulnerable European options considering the market prices of common systematic jump risks under regime-switching jump-diffusion models. The way of regime-switching Esscher transform is adopted to identify an equivalent martingale measure for pricing vulnerable European options. Explicit analytical pricing formulae for vulnerable European options are derived by risk-neutral pricing theory. For comparison, the other two cases are also considered separately. The first case considers all jump risks as unsystematic risks while the second one assumes all jumps risks to be systematic risks. Numerical examples for the valuation of vulnerable European options are provided to illustrate our results and indicate the influence of the market prices of jump risks on the valuation of vulnerable European options.

  3. The Analysis of Corporate Bond Valuation under an Infinite Dimensional Compound Poisson Framework

    Directory of Open Access Journals (Sweden)

    Sheng Fan

    2014-01-01

    Full Text Available This paper analyzes the firm bond valuation and credit spread with an endogenous model for the pure default and callable default corporate bond. Regarding the stochastic instantaneous forward rates and the firm value as an infinite dimensional Poisson process, we provide some analytical results for the embedded American options and firm bond valuations.

  4. Implementing GIS in real estate price prediction and mass valuation: the case study of Nicosia District

    Science.gov (United States)

    Yiorkas, Charalambos; Dimopoulos, Thomas

    2017-09-01

    When the European Commission, International Monetary Fund and European Central Bank arrived in Cyprus to assist for a sustainable solution on the crisis on the banking sector, one of the first things they ordered was a New General Valuation (a mass appraisal that would revalue all properties in Cyprus as on 1st of January 2013), that it would be used for taxation purposes. The above indicates the importance of property mass appraising tools. This task was successfully conducted by the Department of Lands and Surveys. Authors aim to move a step further and implement the use of GIS and GWR techniques to improve the results of the New General Valuation. On a sample of comparative evidences for flats in Nicosia District, GIS was used to measure the impact of spatial attributes on real estate prices and to construct a prediction model in terms of spatially estimating apartment values. In addition to the structural property characteristics, some spatial attributes (landmarks) were also analysed to assess their contribution on the prices of the apartments, including the Central Business District (CBD), schools and universities, as well as the major city roads and the restricted zone that divides the country into two parts; the occupied by Turkish area and the Greek area. The values of the spatial attributes, or locational characteristics, were determined by employing GIS, considering an established model of multicriteria analysis. The price prediction model was analysed using the OLS method and calibrated based on the GWR method. The results of the statistic process indicate an accuracy of 81.34%, showing better performance than the mass valuation system applied by the Department of Land and Surveys in Cyprus with accuracy of 66.76%. This approach suggests that GIS systems are fundamentally important in mass valuation procedures in order to identify the spatial pattern of the attributes, provided that the database is comprised by a sufficient number of comparable

  5. Real Option--A New Approach in the Evaluation of Telecom Investment Projects

    Institute of Scientific and Technical Information of China (English)

    WU Hong

    2005-01-01

    This paper gives a new method into the evaluating system of telecom investment projects, I.e. Real Option. This may overcome the defects resulted from employing Net Present Value (NPV), which is now used in the evaluation of telecom projects. A theoretical analysis of Real Option is provided, followed by an example of telecom investment project to illustrate the differences between the two methods.

  6. Real Options Analysis of Mining Projects

    OpenAIRE

    Rudolf Zdravlje

    2011-01-01

    When long life assets are being evaluated based on constant predictions of future variables and the assumptions of zero management flexibility, is value being missed? In project evaluation today, the most common evaluation methods that calculate a net present value are discounted cash flow (DCF) analysis, decision tree analysis and Monte Carlo simulation. A fourth method, which is beginning to gain ground in terms of its use in the mining industry, is real option analysis (ROA). ROA utilizes ...

  7. A Real Options Approach to Nuclear Waste Disposal in Sweden

    International Nuclear Information System (INIS)

    Soederkvist, Jonas; Joensson, Kristian

    2004-04-01

    This report is concerned with an investigation of how the real options approach can be useful for managerial decisions regarding the phase-out of nuclear power generation in Sweden. The problem of interest is the optimal time-schedule for phase-out activities, where the optimal time-schedule is defined in purely economical terms. The approach taken is actual construction and application of three real options models, which capture different aspects of managerial decisions. The first model concerns when investments in deep disposal facilities should optimally be made. Although the model is a rough simplification of reality, the result is clear. It is economically advantageous to postpone deep disposal forever. The second model focuses on how the uncertainty of future costs relates to managerial investment decisions. Construction of this model required some creativity, as the nuclear phase-out turns out to be quite a special project. The result from the second model is that there can be a value associated with deferral of investments due to the uncertainty of future costs, but the result is less clear-cut compared to the first model. In the third model, we extend an approach suggested by Louberge, Villeneuve and Chesney. The risk of a nuclear accident is introduced through this model and we develop its application to investigate the Swedish phase-out in particular, which implies that waste continuously disposed. In the third model, focus is shifted from investment timing to implementation timing. The results from the third model are merely qualitative, as it is considered beyond the scope of this work to quantitatively determine all relevant inputs. It is concluded that the phase-out of nuclear power generation in Sweden is not just another area of application for standard real options techniques. A main reason is that although there are a lot of uncertain issues regarding the phase-out, those uncertainties do not leave a lot of room for managerial flexibility if

  8. Economic valuation of a toll road concession with traffic guarantees and the abandonment option

    Directory of Open Access Journals (Sweden)

    Frances Fischberg Blank

    2016-03-01

    Full Text Available Abstract Governments worldwide have been encouraging private participation in transportation infrastructure. To increase the feasibility of a project, public-private partnership (PPP may include guarantees or other support to reduce the risks for private investors. It is necessary to value these opportunities under a real options framework and thereby analyze the project's economic feasibility and risk allocation. However, within this structure, sponsors have an implicit option to abandon the project that should be simultaneously valued. Thus, this article proposes a hypothetical toll road concession in Brazil with a minimum traffic guarantee, a maximum traffic ceiling, and an implicit abandonment option. Different combinations of the minimum and maximum levels are presented, resulting in very high or even negative value added to the net present value (NPV. The abandonment option impacts the level of guarantee to be given. Governments should calibrate an optimal level of guarantees to avoid unnecessarily high costs, protect the returns of the sponsor, and lower the probability of abandonment.

  9. REAL OPTIONS ANALYSIS – ASSESSMENT METHOD OF INVESTMENT PROJECTS IN GREEN ENERGY

    Directory of Open Access Journals (Sweden)

    MAFTEI DANIEL

    2014-10-01

    Full Text Available This article highlights the importance of real options as a evaluation method of investment in green energy. Article consider several theoretical and practical approaches, the analysis based on real options by many authors who have theorized and used this method. Each approach provides a operationalisation through a steps series of specific evaluation. This paper highlights the different views: academics, financiers, managers and facilitates the access to an accurate evaluation decisions of projects.

  10. Disclosed Values of Option-Based Compensation

    DEFF Research Database (Denmark)

    Bechmann, Ken L.; Hjortshøj, Toke Lilhauge

    New accounting standards require firms to expense the costs of option-based compensation (OBC), but the associated valuations offer many challenges for firms. Earlier research has documented that firms in the U.S. generally underreport the values of OBC by manipulating the inputs used for valuation......-Scholes parameters in their valuations. Furthermore, firms determine the expected time to maturity in a way that is generally consistent with the guidelines provided by the new accounting standards. The findings differ from those of the U.S., but is consistent with the more limited use of OBC and the lower level...

  11. Investing in Marine Scrubber under Uncertainty with Real Option Thinking

    DEFF Research Database (Denmark)

    Jiang, Liping; Hansen, Carsten Ørts

    works that examine the economic feasibility of scrubber retrofitting through the net present value rule, this paper applies the Real Option Analysis to find the optimal investment strategies. The proposed decision-making framework addresses the uncertainty and the value of deferral option embedded...... in the scrubber investment. The multiple sources of investment uncertainties are explicitly analyzed and integrated in the modeling by using Rainbow option. The results demonstrate that the value of the scrubber investment has significantly increased for several cases by considering the deferral option....... It is thus important for ship owners to consider the available options before proceeding with abandoning or investing strategy. The proposed framework can be widely applied to other ship retrofitting investment evaluations, which include similar investment alternatives and uncertainties....

  12. The value of millisecond expiry options in spot foreign exchange markets

    Directory of Open Access Journals (Sweden)

    John Stevenson

    2016-12-01

    Full Text Available The spot foreign exchange marketplaces are split into two types by their respective trading rules: markets with conventional resting orders versus markets with resting that orders that include optionality. This optionality is owned by the counterparty who placed the resting order and provides the option to refuse the aggressive order matched against the resting order. This paper describes and contrasts these two types of markets. A valuation method for these very short expiry options on the later marketplace is proposed. Appropriate historical volatility metrics are defined and applied for these uniquely short expiry timescales. These historical volatility and valuation methods are used to describe some historical intraday periods, and are applied to various trading scenarios. Unique behaviors driven by the value of these options are highlighted. The benefits and risks of trading on these markets are described in light of this valuation approach. The effects of various addition constraints on the liquidity providers for these optionality matching marketplaces are introduced. Through judicious timing of order placement and appropriate constraints on the behaviors of the liquidity providers on these markets, the result is shown to be tighter spreads, greater breath and depth of liquidity, and the high fill ratios than the more conventional non-optionality matching markets.

  13. Semantically rich 3D building and cadastral models for valuation

    NARCIS (Netherlands)

    Isikdag, U.; Horhammer, M.; Zlatanova, S.; Kathmann, R.; Van Oosterom, P.J.M.

    2014-01-01

    Valuation of real estate/ properties is in many countries/ cities the basis for fair taxation. The value depends on many aspects, including the physical real world aspects (geometries, material of object as build) and legal/virtual aspects (rights, restrictions, responsibilities, zoning/development

  14. A Real Options Perspective On R&D Portfolio Diversification

    NARCIS (Netherlands)

    S. van Bekkum (Sjoerd); H.P.G. Pennings (Enrico); J.T.J. Smit (Han)

    2009-01-01

    textabstractThis paper shows that the conditionality of investment decisions in R&D has a critical impact on portfolio risk, and implies that traditional diversification strategies should be reevaluated when a portfolio is constructed. Real option theory argues that research projects have

  15. Combination of real options and game-theoretic approach in investment analysis

    Science.gov (United States)

    Arasteh, Abdollah

    2016-09-01

    Investments in technology create a large amount of capital investments by major companies. Assessing such investment projects is identified as critical to the efficient assignment of resources. Viewing investment projects as real options, this paper expands a method for assessing technology investment decisions in the linkage existence of uncertainty and competition. It combines the game-theoretic models of strategic market interactions with a real options approach. Several key characteristics underlie the model. First, our study shows how investment strategies rely on competitive interactions. Under the force of competition, firms hurry to exercise their options early. The resulting "hurry equilibrium" destroys the option value of waiting and involves violent investment behavior. Second, we get best investment policies and critical investment entrances. This suggests that integrating will be unavoidable in some information product markets. The model creates some new intuitions into the forces that shape market behavior as noticed in the information technology industry. It can be used to specify best investment policies for technology innovations and adoptions, multistage R&D, and investment projects in information technology.

  16. The Factor Structure in Equity Options

    DEFF Research Database (Denmark)

    Christoffersen, Peter; Fournier, Mathieu; Jacobs, Kris

    Principal component analysis of equity options on Dow-Jones firms reveals a strong factor structure. The first principal component explains 77% of the variation in the equity volatility level, 77% of the variation in the equity option skew, and 60% of the implied volatility term structure across...... equities. Furthermore, the first principal component has a 92% correlation with S&P500 index option volatility, a 64% correlation with the index option skew, and a 80% correlation with the index option term structure. We develop an equity option valuation model that captures this factor structure...

  17. Costing the EPR Project Using the Real Options Method

    International Nuclear Information System (INIS)

    Epaulard, Anne; Gallon, Stephane

    2001-01-01

    Real options theory makes it possible to cost investments which offer flexibility but whose returns are uncertain, such as the construction in 2000 of an EPR prototype; this prototype will enable the European pressurised-water reactor (EPR) to be used to renew EDF's nuclear power stations in 2020 (flexibility) but its economic worth will then depend on the cost of the competing gas-fired power plants (uncertain return). Options theory shows that investing in EPR technology in 2000 provides sufficient flexibility in 2020 to be considered cost-effective, even though use of EPRs is unlikely by that date. The investment made in 2000 to develop EPR technology therefore actually plays the part of an option or, in other words, insurance (against the risk of high gas prices)

  18. Valuation of long-term investments in energy assets under uncertainty

    Energy Technology Data Exchange (ETDEWEB)

    Abadie, L. M. [Bilbao Bizkaia Kutxa, Gran Via 30, 48009 Bilbao (Spain)

    2009-07-01

    This paper aims to contribute to the development of valuation models for long-term investments while keeping an eye on market prices. The adopted methodology is rooted on the existence of markets for futures and options on commodities related to energy investments. These markets are getting ever-increasingly liquid with ever-longer maturities while trading contracts. We discuss the advantages of this approach relative to other alternatives such as the Net Present Value (NPV) or the Internal Rate of Return (IRR), despite a limited increase in the complexity of the models involved. More specifically, using the valuation methods well-known to energy-finance academics, the paper shows how to: break down an investment into its constituent parts, apply to each of them the corresponding risk premium, value annuities on assets with a deterministic or stochastic behavior, and value the options that are available to its owner, in order to get an overall value of the investment project. It also includes an application to improvement in coal consumption, where futures markets are used to get a numerical estimate of the parameters that are required for valuation. The results are then compared with those from traditional methodologies. Conclusions for this type of investments under uncertainty are derived. (author)

  19. Valuation of Long-Term Investments in Energy Assets under Uncertainty

    Directory of Open Access Journals (Sweden)

    Luis M. Abadie

    2009-09-01

    Full Text Available This paper aims to contribute to the development of valuation models for long-term investments while keeping an eye on market prices. The adopted methodology is rooted on the existence of markets for futures and options on commodities related to energy investments. These markets are getting ever-increasingly liquid with ever-longer maturities while trading contracts. We discuss the advantages of this approach relative to other alternatives such as the Net Present Value (NPV or the Internal Rate of Return (IRR, despite a limited increase in the complexity of the models involved. More specifically, using the valuation methods well-known to energy-finance academics, the paper shows how to: break down an investment into its constituent parts, apply to each of them the corresponding risk premium, value annuities on assets with a deterministic or stochastic behavior, and value the options that are available to its owner, in order to get an overall value of the investment project. It also includes an application to improvement in coal consumption, where futures markets are used to get a numerical estimate of the parameters that are required for valuation. The results are then compared with those from traditional methodologies. Conclusions for this type of investments under uncertainty are derived.

  20. Valuation of long-term investments in energy assets under uncertainty

    International Nuclear Information System (INIS)

    Abadie, L. M.

    2009-01-01

    This paper aims to contribute to the development of valuation models for long-term investments while keeping an eye on market prices. The adopted methodology is rooted on the existence of markets for futures and options on commodities related to energy investments. These markets are getting ever-increasingly liquid with ever-longer maturities while trading contracts. We discuss the advantages of this approach relative to other alternatives such as the Net Present Value (NPV) or the Internal Rate of Return (IRR), despite a limited increase in the complexity of the models involved. More specifically, using the valuation methods well-known to energy-finance academics, the paper shows how to: break down an investment into its constituent parts, apply to each of them the corresponding risk premium, value annuities on assets with a deterministic or stochastic behavior, and value the options that are available to its owner, in order to get an overall value of the investment project. It also includes an application to improvement in coal consumption, where futures markets are used to get a numerical estimate of the parameters that are required for valuation. The results are then compared with those from traditional methodologies. Conclusions for this type of investments under uncertainty are derived. (author)

  1. Valuation of Electric Power System Services and Technologies

    Energy Technology Data Exchange (ETDEWEB)

    Kintner-Meyer, Michael C. W. [Pacific Northwest National Lab. (PNNL), Richland, WA (United States); Homer, Juliet S. [Pacific Northwest National Lab. (PNNL), Richland, WA (United States); Balducci, Patrick J. [Pacific Northwest National Lab. (PNNL), Richland, WA (United States); Weimar, Mark R. [Pacific Northwest National Lab. (PNNL), Richland, WA (United States)

    2017-08-01

    Accurate valuation of existing and new technologies and grid services has been recognized to be important to stimulate investment in grid modernization. Clear, transparent, and accepted methods for estimating the total value (i.e., total benefits minus cost) of grid technologies and services are necessary for decision makers to make informed decisions. This applies to home owners interested in distributed energy technologies, as well as to service providers offering new demand response services, and utility executives evaluating best investment strategies to meet their service obligation. However, current valuation methods lack consistency, methodological rigor, and often the capabilities to identify and quantify multiple benefits of grid assets or new and innovative services. Distributed grid assets often have multiple benefits that are difficult to quantify because of the locational context in which they operate. The value is temporally, operationally, and spatially specific. It varies widely by distribution systems, transmission network topology, and the composition of the generation mix. The Electric Power Research Institute (EPRI) recently established a benefit-cost framework that proposes a process for estimating multiple benefits of distributed energy resources (DERs) and the associated cost. This document proposes an extension of this endeavor that offers a generalizable framework for valuation that quantifies the broad set of values for a wide range of technologies (including energy efficiency options, distributed resources, transmission, and generation) as well as policy options that affect all aspects of the entire generation and delivery system of the electricity infrastructure. The extension includes a comprehensive valuation framework of monetizable and non-monetizable benefits of new technologies and services beyond the traditional reliability objectives. The benefits are characterized into the following categories: sustainability, affordability, and

  2. Valuation of investments in natural resources using contingent-claim framework with application to bituminous coal developments in Korea

    International Nuclear Information System (INIS)

    Won, Chaehwan

    2009-01-01

    As Brennan and Schwartz [Brennan M, Schwartz E. Evaluating natural resource investment. Journal of Business 1985;58:135-57] point out in their pioneering work, the valuation of natural resources projects is particularly difficult due to the high degree of uncertainty in output prices of resources. In general, there are two competing procedures to evaluate risky projects in natural resources developments. One is decision analytic, based on traditional discounted cash flow and stochastic dynamic programming [Fleten SE, Maribu KM, Wangensteen I. Optimal investment strategies in decentralized renewable power generation under uncertainty. Energy 2007;32:803-15; Smith J, McCardle K. Valuing oil properties: integrating option pricing and decision analysis approaches. Operations Research 1998;46(2):198-217; Szklo AS, Carneiro JTG, Machado G. Break-even price for upstream activities in Brazil: evaluation of the opportunity cost of oil production delay in a non-mature sedimentary production region. Energy 2008;33:589-600], and the other is contingent claims analysis, based on the no-arbitrage theory of financial markets [Brennan M, Schwartz E. Evaluating natural resource investment. Journal of Business 1985;58:135-57; Emhjellen M, Alaouze CM. A comparison of discounted cash flow and modern asset pricing methods - project selection and policy implications. Energy Policy 2003;31:1213-20; Laughton D. The management of flexibility in the upstream petroleum industry. The Energy Journal 1998;19:83-114; Paddock L, Siegel D, Smith J. Option valuation of claims on real assets: the case of offshore petroleum leases. Quarterly Journal of Economics 1988;103(3):479-508; Schwartz ES. Valuing long-term commodity assets. Journal of Energy Finance and Development 1998;3(2):85-99; Sezgen O, Goldman CA, Krishnarao P. Option value of electricity demand response. Energy 2007;32:108-19]. In this paper, we use the second approach to develop a new model, and the main contributions are providing a

  3. DIRECTIONS FOR FUTURE CONSTRUCTION SUPPLY CHAIN MANAGEMENT RESEARCH IN NEW ZEALAND: A REAL OPTIONS PERSPECTIVE

    Directory of Open Access Journals (Sweden)

    Tran, Van

    2012-04-01

    Full Text Available Real Options (RO has been a universally accepted concept in a number of major industries. However, its use in the construction supply chain management (CSCM sector has been limited. Some rare supply chain management RO studies have shown a number of limitations. First, there is a lack of a rigorous theoretical RO framework pertaining specifically to CSCM. All such supply chain management RO studies are based off RO theories or models developed for other sectors (engineering, infrastructure, natural resources. And second, attempts to extend real option to wider uses in CSCM seem premature at the present. This paper reviews all recent literature pertaining to real options and real options applied specifically to the construction supply chain management area. The study proposes a research programme pertaining to CSCM in New Zealand in order to enhance the current understanding of RO in this area and in the process develop a comprehensive theory for the RO application in New Zealand CSCM.

  4. Construction strategies and lifetime uncertainties for nuclear projects: A real option analysis

    International Nuclear Information System (INIS)

    Jain, Shashi; Roelofs, Ferry; Oosterlee, Cornelis W.

    2013-01-01

    Highlights: • Real options can be used to value flexibility of modular reactors. • Value of NPPs increases with implementation of long term cost reductions. • Levels of uncertainties affect the choice between projects. -- Abstract: Small and medium sized reactors, SMRs (according to IAEA, ‘small’ are reactors with power less than 300 MWe, and ‘medium’ with power less than 700 MWe) are considered as an attractive option for investment in nuclear power plants. SMRs may benefit from flexibility of investment, reduced upfront expenditure, and easy integration with small sized grids. Large reactors on the other hand have been an attractive option due to economy of scale. In this paper we focus on the advantages of flexibility due to modular construction of SMRs. Using real option analysis (ROA) we help a utility determine the value of sequential modular SMRs. Numerical results under different considerations, like possibility of rare events, learning, uncertain lifetimes are reported for a single large unit and modular SMRs

  5. Construction strategies and lifetime uncertainties for nuclear projects: A real option analysis

    Energy Technology Data Exchange (ETDEWEB)

    Jain, Shashi, E-mail: s.jain@cwi.nl [TU Delft, Delft Institute of Applied Mathematics, Delft (Netherlands); Nuclear Research Group, Petten (Netherlands); Roelofs, Ferry, E-mail: roelofs@nrg.eu [Nuclear Research Group, Petten (Netherlands); Oosterlee, Cornelis W., E-mail: c.w.oosterlee@cwi.nl [CWI – Centrum Wiskunde and Informatica, Amsterdam (Netherlands); TU Delft, Delft Institute of Applied Mathematics, Delft (Netherlands)

    2013-12-15

    Highlights: • Real options can be used to value flexibility of modular reactors. • Value of NPPs increases with implementation of long term cost reductions. • Levels of uncertainties affect the choice between projects. -- Abstract: Small and medium sized reactors, SMRs (according to IAEA, ‘small’ are reactors with power less than 300 MWe, and ‘medium’ with power less than 700 MWe) are considered as an attractive option for investment in nuclear power plants. SMRs may benefit from flexibility of investment, reduced upfront expenditure, and easy integration with small sized grids. Large reactors on the other hand have been an attractive option due to economy of scale. In this paper we focus on the advantages of flexibility due to modular construction of SMRs. Using real option analysis (ROA) we help a utility determine the value of sequential modular SMRs. Numerical results under different considerations, like possibility of rare events, learning, uncertain lifetimes are reported for a single large unit and modular SMRs.

  6. A real options approach to biotechnology investment policy-the case of developing a Campylobacter vaccine to poultry.

    Science.gov (United States)

    Lund, Mogens; Jensen, Jørgen Dejgård

    2016-06-01

    The aim of the article is to identify and analyse public-private incentives for the development and marketing of new animal vaccines within a real options methodological framework, and to investigate how real options methodology can be utilized to support economic incentives for vaccine development in a cost-effective way. The development of a vaccine against Campylobacter jejuni in poultry is applied as a case study. Employing the real options methodology, the net present value of the vaccine R&D project becomes larger than a purely probabilistic expected present value throughout the different stages of the project - and the net present value becomes larger, when more types of real options are taken into consideration. The insight from the real options analysis reveals opportunities for new policies to promote the development of animal vaccines. One such approach might be to develop schemes combining stage-by-stage optimized subsidies in the individual development stages, with proper account taken of investors'/developers' economic incentives to proceed, sell or cancel the project in the respective stages. Another way of using the real options approach to support the development of desirable animal vaccines could be to issue put options for the vaccine candidate, enabling vaccine developers to hedge against the economic risk from market volatility. Copyright © 2016 Elsevier B.V. All rights reserved.

  7. Optimal Investment Timing and Size of a Logistics Park: A Real Options Perspective

    Directory of Open Access Journals (Sweden)

    Dezhi Zhang

    2017-01-01

    Full Text Available This paper uses a real options approach to address optimal timing and size of a logistics park investment with logistics demand volatility. Two important problems are examined: when should an investment be introduced, and what size should it be? A real option model is proposed to explicitly incorporate the effect of government subsidies on logistics park investment. Logistic demand that triggers the threshold for investment in a logistics park project is explored analytically. Comparative static analyses of logistics park investment are also carried out. Our analytical results show that (1 investors will select smaller sized logistics parks and prepone the investment if government subsidies are considered; (2 the real option will postpone the optimal investment timing of logistics parks compared with net present value approach; and (3 logistic demands can significantly affect the optimal investment size and timing of logistics park investment.

  8. The Organizational Valuation of Valuation Devices

    DEFF Research Database (Denmark)

    Hauge, Amalie Martinus

    2016-01-01

    —integrated modes of valuation. Empirically, the paper draws on an ethnographic study of Lean management at a children’s hospital, which is presented through analytical snapshots. The paper suggests that an organizational turn is relevant for valuation studies, as this frst allows an analytical expansion to include...

  9. Influence of Transaction costs and real options on firms' own-or-rent ...

    African Journals Online (AJOL)

    Based on secondary data on 79 companies in Mekelle, Ethiopia, this paper investigates the influence of transaction cost and real option factors on firms' own or rent decision for building resources. Empirical results suggest that both transaction cost and option factors have significant influence on firms' own or rent decision.

  10. New perspective of real options theory for policy analysis

    NARCIS (Netherlands)

    Sadowski, B.M.

    2007-01-01

    In deze Reflectie geeft Sadowski een alternatief, of eigenlijk een aanvulling op de KBA, vanuit de real options theory, zoals die ook in de financiële sector gebruikt wordt. Het idee is dat er in dynamische markten veel ontwikkelingen zijn: technologisch, een markt in beweging of industriële

  11. Valuation of gas stored in salt cavern facilities

    Energy Technology Data Exchange (ETDEWEB)

    Bond, Michael A. [St. Mary' s University, TX (United States); Grant, Floyd H. [Purdue University, IN (United States)

    2008-07-01

    Since natural gas production is relatively inelastic towards demand in the short term, underground storage is used as a buffer against periods of high demand. Of the three most common storage facility types, depleted reservoirs, aquifers and manmade salt caverns, the latter is the most costly to develop. The challenge then is to maximize profits through efficient operation, well-timed injection and withdrawal of gas. The valuation of a commodity in storage is a challenging problem and has been the subject of study for decades. We investigate selected existing valuation approaches and look for ways to leverage salt-cavern-specific physical characteristics for financial advantage. The basis for our valuation is the Black-Scholes model for pricing options. Then, applying Monte-Carlo methods and simulation, we model combinations of characteristics in multi-cavern facilities and their impact on profitability. We describe the theory behind our work and our analytical framework and provide numerical results of our analysis. Our approach offers increased efficiency in salt-cavern gas storage facility operations. (author)

  12. Evaluation of Foreign Investment in Power Plants using Real Options

    Science.gov (United States)

    Kato, Moritoshi; Zhou, Yicheng

    This paper proposes new methods for evaluating foreign investment in power plants under market uncertainty using a real options approach. We suppose a thermal power plant project in a deregulated electricity market. One of our proposed methods is that we calculate the cash flow generated by the project in a reference year using actual market data to incorporate periodic characteristics of energy prices into a yearly cash flow model. We make the stochastic yearly cash flow model with the initial value which is the cash flow in the reference year, and certain trend and volatility. Then we calculate the real options value (ROV) of the project which has abandonment options using the yearly cash flow model. Another our proposed method is that we evaluate foreign currency/domestic currency exchange rate risk by representing ROV in foreign currency as yearly pay off and exchanging it to ROV in domestic currency using a stochastic exchange rate model. We analyze the effect of the heat rate and operation and maintenance costs of the power plant on ROV, and evaluate exchange rate risk through numerical examples. Our proposed method will be useful for the risk management of foreign investment in power plants.

  13. Applying Real Options for Evaluating Investments in ERP Systems

    Science.gov (United States)

    Nakagane, Jun; Sekozawa, Teruji

    This paper intends to verify effectiveness of real options approach for evaluating investments in Enterprise Resource Planning systems (ERP) and proves how important it is to disclose shadow options potentially embedded in ERP investment. The net present value (NPV) method is principally adopted to evaluate the value of ERP. However, the NPV method assumes no uncertainties exist in the object. It doesn't satisfy the current business circumstances which are filled with dynamic issues. Since the 1990s the effectiveness of option pricing models for Information System (IS) investment to solve issues in the NPV method has been discussed in the IS literature. This paper presents 3 business cases to review the practical advantages of such techniques for IS investments, especially ERP investments. The first case is EDI development. We evaluate the project by a new approach with lighting one of shadow options, EDI implementation. In the second case we reveal an ERP investment has an “expanding option” in a case of eliminating redundancy. The third case describes an option to contract which is deliberately slotted in ERP development to prepare transferring a manufacturing facility.

  14. Capacity choice in (strategic) real options models : A survey

    NARCIS (Netherlands)

    Huberts, Nick; Huisman, Kuno; Kort, Peter; Lavrutich, Maria

    2015-01-01

    The theory of real options determines the optimal time to invest in a project of given size. As a main result, it is found that in a more uncertain environment, it is optimal for a firm to delay its investment. In other words, uncertainty generates a “value of waiting.” Recently, contributions

  15. Applications of Real Options in the Real Estate Market Focusing the City of Rio de Janeiro

    Directory of Open Access Journals (Sweden)

    Priscilla Yung Medeiros

    2003-06-01

    Full Text Available An investment opportunity in the real state market can be compared with an option and, because of this analogy, we can make use of the real options theory to determinate not only the best timing to begin a new property development, but also to determine the optimal density to develop in a specific property. To investigate these two main decisions, we are going to base our research on the model developed by Williams (1991 and extend it in a way to include taxes and a discount in the net cash inflow caused by the times spent in the construction process. An empirical analysis of the of the residential real estate market in the city of Rio de Janeiro is going to be developed in a way to verify the compatibility of the theoretical model developed here according to the reality of this market. We found that the extensions proposed to the basic model of Williams (1991 had significant effects in the theoretical model. We could also confirm empirically that the theoretical results are compatible to the reality of this market.

  16. 26 CFR 20.2032A-4 - Method of valuing farm real property.

    Science.gov (United States)

    2010-04-01

    ... actually occurs. In general, therefore, rentals for any property which qualifies for special use valuation... rentals are determined may be used in the formula valuation. (d) Comparable real property defined... according to generally accepted real property valuation rules. The determination of properties which are...

  17. THE PROBLEM OF URBAN LAND MASS VALUATION OBJECTIVENESS AND WAYS OF SOLVING IT

    Directory of Open Access Journals (Sweden)

    DRAPIKOVSKYI O. I.

    2015-12-01

    Full Text Available Raising of problem. Implementation of prudent investment, urban planning and fiscal policy is possible only if there is knowledge of the real value of land in the entire city, which is obtained by the mass appraisal of urban land. The implementation of this important social function puts strict requirements for urban land mass valuation results objectiveness and comparability, stated in the international sectoral standards and regulations. Purpose. The aim of the article is to determine the basic requirements to urban land mass valuation results objectiveness maintenance and to analyse the compliance of the normative monetary valuation with these requirements. Conclusion. The problem of urban land mass valuation objectiveness can be considered through the prism of the ontological, epistemological and logical aspects, compliance with which allows the anticipation of the expected improvement of this valuation methodological apparatus efficiency.

  18. Real Silver and Its Investment and Business Options

    Directory of Open Access Journals (Sweden)

    Novotný Josef

    2016-06-01

    Full Text Available The article deals with investment and business opportunities offered by silver. Silver is the metal used in industry and for investing at financial markets. The main problem related to this real commodity is the issue of “the undervaluation” of its investment options, if compared to gold. If considering silver as the investment option, its investment potential is significantly enhanced by its industrial usage. The aim of this paper is to highlight business and investment opportunities for both professionals and non professional investors at the commodity markets. The price growth of this investment and industrial metal can generate profits for the investors. And on the other hand, industries which cannot do without silver in their production may efficiently utilize the knowledge of setting up its price at the markets.

  19. What determines how top managers value their stock options?

    NARCIS (Netherlands)

    Sautner, Z.; Weber, M.

    2008-01-01

    What determines how top managers value their executive stock options? We explore this question empirically by using a unique survey data set which combines subjective option valuation data with a wide set of individual-level variables. Inconsistent with the predictions of theory, individuals in our

  20. Traffic Light Options

    DEFF Research Database (Denmark)

    Jørgensen, Peter Løchte

    This paper introduces, prices, and analyzes traffic light options. The traffic light option is an innovative structured OTC derivative developed independently by several London-based investment banks to suit the needs of Danish life and pension (L&P) companies, which must comply with the traffic...... 2006, and supervisory authorities in many other European countries have implemented similar regulation. Traffic light options are therefore likely to attract the attention of a wider audience of pension fund managers in the future. Focusing on the valuation of the traffic light option we set up a Black...... light scenarios. These stress scenarios entail drops in interest rates as well as in stock prices, and traffic light options are thus designed to pay off and preserve sufficient capital when interest rates and stock prices fall simultaneously. Sweden's FSA implemented a traffic light system in January...

  1. Traffic Light Options

    DEFF Research Database (Denmark)

    Jørgensen, Peter Løchte

    2007-01-01

    This paper introduces, prices, and analyzes traffic light options. The traffic light option is an innovative structured OTC derivative developed independently by several London-based investment banks to suit the needs of Danish life and pension (L&P) companies, which must comply with the traffic...... 2006, and supervisory authorities in many other European countries have implemented similar regulation. Traffic light options are therefore likely to attract the attention of a wider audience of pension fund managers in the future. Focusing on the valuation of the traffic light option we set up a Black...... light scenarios. These stress scenarios entail drops in interest rates as well as in stock prices, and traffic light options are thus designed to pay off and preserve sufficient capital when interest rates and stock prices fall simultaneously. Sweden's FSA implemented a traffic light system in January...

  2. How Do Real Options Concepts Fit in Agile Requirements Engineering?

    NARCIS (Netherlands)

    Racheva, Z.; Daneva, Maia

    Agile requirements engineering is driven by creating business value for the client and heavily involves the client in decision-making under uncertainty. Real option thinking seems to be suitable in supporting the client’s decision making process at inter-iteration time. This paper investigates the

  3. Function Modelling Of The Market And Assessing The Degree Of Similarity Between Real Properties - Dependent Or Independent Procedures In The Process Of Office Property Valuation

    Directory of Open Access Journals (Sweden)

    Barańska Anna

    2015-09-01

    Full Text Available Referring to the developed and presented in previous publications (e.g. Barańska 2011 two-stage algorithm for real estate valuation, this article addresses the problem of the relationship between the two stages of the algorithm. An essential part of the first stage is the multi-dimensional function modelling of the real estate market. As a result of selecting the model best fitted to the market data, in which the dependent variable is always the price of a real property, a set of market attributes is obtained, which in this model are considered to be price-determining. In the second stage, from the collection of real estate which served as a database in the process of estimating model parameters, the selected objects are those which are most similar to the one subject to valuation and form the basis for predicting the final value of the property being valued. Assessing the degree of similarity between real properties can be carried out based on the full spectrum of real estate attributes that potentially affect their value and which it is possible to gather information about, or only on the basis of those attributes which were considered to be price-determining in function modelling. It can also be performed by various methods. This article has examined the effect of various approaches on the final value of the property obtained using the two-stage prediction. In order fulfill the study aim precisely as possible, the results of each calculation step of the algorithm have been investigated in detail. Each of them points to the independence of the two procedures.

  4. Theory of the property valuation + valuation of specific property in Prague 6

    OpenAIRE

    Wurst, David

    2011-01-01

    The objective of Bachelor thesis is the definition of basic terms and methods used in the property valuation and the subsequent valuation of specific property. The thesis is divided into theoretical and practical part. The theoretical part is devoted to (description) describing the basic terms and bases needed for the valuation and characteristics of the most widely used methods of property valuation. In the practical part is going to be made the valuation of the specific property by the comp...

  5. Optimizing the Level of Renewable Electric R&D Expenditures Using Real Options Analysis

    Energy Technology Data Exchange (ETDEWEB)

    Davis, G.; Owens, B.

    2003-02-01

    One of the primary objectives of the United States' federal non-hydro renewable electric R&D program is to promote the development of technologies that have the potential to provide consumers with stable and secure energy supplies. In order to quantify the benefits provided by continued federal renewable electric R&D, this paper uses ''real option'' pricing techniques to estimate the value of renewable electric technologies in the face of uncertain fossil fuel prices. Within the real options analysis framework, the current value of expected future supply from renewable electric technologies, net of federal R&D expenditures, is estimated to be $30.6 billion. Of this value, 86% can be attributed to past federal R&D efforts, and 14% can be attributed to future federal R&D efforts, assuming continued federal R&D funding at $300 million/year. In addition, real options analysis shows that the value of renewable electric technologies increases as current and future R&D funding levels increase. This indicates that the current level of federal renewable electric R&D funding is sub-optimal low.

  6. Currency option pricing in a credible exchange rate target zone

    NARCIS (Netherlands)

    Veestraeten, D.

    2013-01-01

    This article examines currency option pricing within a credible target zone arrangement where interventions at the boundaries push the exchange rate back into its fluctuation band. Valuation of such options is complicated by the requirement that the reflection mechanism should prevent the arbitrage

  7. Currency option pricing in a credible exchange rate target zone

    NARCIS (Netherlands)

    Veestraeten, D.

    2012-01-01

    This article examines currency option pricing within a credible target zone arrangement where interventions at the boundaries push the exchange rate back into its fluctuation band. Valuation of such options is complicated by the requirement that the reflection mechanism should prevent the arbitrage

  8. Mineral resources of Slovakia, questions of classification and valuation

    Directory of Open Access Journals (Sweden)

    Baláž Peter

    1999-06-01

    Full Text Available According to the Constitution of Slovak Republic, mineral resources of Slovakia are in the ownership of Slovak Republic. In 1997, 721 exclusive mineral deposits of mineral fuels, metals and industrial minerals were registered in Slovakia. The classification for economic and uneconomic reserves/resources requires an annual updating, concerning changes of market mineral prices and mine production costs. In terms of economic valuation of mineral resources, a new United Nations international classification for reserves/resources appears as a perspective alternative. Changes of geological and mining legislation are necessary for real valuation of Slovak mineral resources.

  9. Consumption-based Equity Valuation

    DEFF Research Database (Denmark)

    Bach, Christian; Christensen, Peter Ove

    2013-01-01

    the performance of the model with several implementations of standard valuation models, both in terms of absolute valuation errors, and in terms of the returns on simple investment strategies based on the differences between model and market prices in the respective valuation models. The CCAPM-based valuation...... model performs substantially better than the best performing standard valuation model when comparing absolute valuation errors. Both types of models are able to identify investment strategies with subsequent excess returns but also in this setting, the CCAPM-based valuation model outperforms...... residual income for risk in the numerator rather than through a risk-adjusted cost of equity in the denominator. The risk-adjustments are derived based on assumptions about the time-series properties of residual income returns and aggregate consumption rather than on historical stock returns. We compare...

  10. THE THEORY OF REAL OPTIONS in investment ANALYSIS of agroforestry systems

    Directory of Open Access Journals (Sweden)

    Maísa Santos Joaquim

    2015-09-01

    Full Text Available In this study we compared the values generated by traditional economic analysis (Net Present Value - NPV with Real Options Method. The objective was to apply the method proposed by Copeland & Antikarov for rainbow options, due to three stochastic variables selected with decision of abandonment if the project value with flexibility was less than the value of the underlying stock. It enabled the flexibility value generation in order to entrepreneurs to have more confidence in their decision when they are investing in a project with Agroforestry System, with different scenarios visualization in a single analysis. The results evidenced that the economic viability analysis, using Real Options, provided the best view of the possible scenarios, within a range generated by the prices volatility. The Net Present Value adopted as the underlying stock value was R$ 5,684.32, using the discount rate (WACC of 9.95% and risk-free interest rate of 7.5%. To determine the volatility were calculated: the logarithmic return standard deviation (27.06, the average (0.0883, upward movements values (u (1.3107 with 61.34% of probability and downward movements values (d(0.7628 with 38.66%  of probability. The option value in case of abandonment was R$ 2,059.01/ha positive. The results showed that the NPV overestimated the project return and that it would be viable to abandon it.

  11. The Factor Structure in Equity Options

    DEFF Research Database (Denmark)

    Christoffersen, Peter; Fournier, Mathieu; Jacobs, Kris

    2018-01-01

    Equity options display a strong factor structure. The first principal components of the equity volatility levels, skews, and term structures explain a substantial fraction of the crosssectional variation. Furthermore, these principal components are highly correlated with the S&P 500 index option...... volatility, skew, and term structure, respectively. We develop an equity option valuation model that captures this factor structure. The model predicts that firms with higher market betas have higher implied volatilities, steeper moneyness slopes, and a term structure that covaries more with the market...

  12. A real options approach to biotechnology Investment policy - the case of developing a Campylobacter vaccine to poultry

    DEFF Research Database (Denmark)

    Lund, Mogens; Jensen, Jørgen Dejgård

    2016-01-01

    The aim of the article is to identify and analyse public-private incentives for the development and marketing of new animal vaccines within a real options methodological framework, and to investigate how real options methodology can be utilized to support economic incentives for vaccine developme...

  13. Equity valuation : Under Armour

    OpenAIRE

    Vicente, António Rafael Mendes

    2016-01-01

    The present dissertation aims to value Under Armour, an American sportswear company. Since Valuation is not an exact science, during the literature review will be presented several valuation methods. Most of the authors mention DCF Valuation as one of the best but it seems impossible for them to reach a consensus about which one is in fact the best. In order to get Under Armour’s target price, a DCF valuation will be made and accompanied by a Relative Valuation that, when it is properly us...

  14. The impact of delaying an investment decision on R&D projects in real option game

    International Nuclear Information System (INIS)

    Chang, Shuhua; Li, Yue; Gao, Fanglu

    2016-01-01

    In a research and development (R&D) investment, the cost and the project value of such an investment are usually uncertain, which thus increases its complexity. Correspondingly, the NPV (Net Present Value) rule fails to evaluate the value of this project exactly, because this method does not take into account the market uncertainty, irreversibility of investment and ability of delay entry. In this paper, we employ the real option theory to evaluate the project value of a R&D investment. Since the cost of a R&D investment is very high and the flow of the information is crowded, an investor cannot make an immediate decision every time. So, the proposed real option model is an exchange option. At the same time, combining the real option and the game theory, we can find the Nash equilibrium which is the optimal strategy. Moreover, we also study how the delayed time influences the price of the project investment and how the different delayed times effect the choice of the optimal strategies.

  15. When to Wait for More Evidence? Real Options Analysis in Proton Therapy

    Science.gov (United States)

    Abrams, Keith R.; de Ruysscher, Dirk; Pijls-Johannesma, Madelon; Peters, Hans J.M.; Beutner, Eric; Lambin, Philippe; Joore, Manuela A.

    2011-01-01

    Purpose. Trends suggest that cancer spending growth will accelerate. One method for controlling costs is to examine whether the benefits of new technologies are worth the extra costs. However, especially new and emerging technologies are often more costly, while limited clinical evidence of superiority is available. In that situation it is often unclear whether to adopt the new technology now, with the risk of investing in a suboptimal therapy, or to wait for more evidence, with the risk of withholding patients their optimal treatment. This trade-off is especially difficult when it is costly to reverse the decision to adopt a technology, as is the case for proton therapy. Real options analysis, a technique originating from financial economics, assists in making this trade-off. Methods. We examined whether to adopt proton therapy, as compared to stereotactic body radiotherapy, in the treatment of inoperable stage I non-small cell lung cancer. Three options are available: adopt without further research; adopt and undertake a trial; or delay adoption and undertake a trial. The decision depends on the expected net gain of each option, calculated by subtracting its total costs from its expected benefits. Results. In The Netherlands, adopt and trial was found to be the preferred option, with an optimal sample size of 200 patients. Increase of treatment costs abroad and costs of reversal altered the preferred option. Conclusion. We have shown that real options analysis provides a transparent method of weighing the costs and benefits of adopting and/or further researching new and expensive technologies. PMID:22147003

  16. Valuation of Property.

    Science.gov (United States)

    Bodley, Joanne H.; Goodenough, Linda

    This report describes property tax revenues and assessment rates for all 50 States during 1966. The following information is summarized by State and by class of property: (1) The total valuation and the taxable valuation of property subject to local general property taxation and the percent distribution of total valuation by class of property; (2)…

  17. The Factor Structure in Equity Options

    DEFF Research Database (Denmark)

    Christoffersen, Peter; Fournier, Mathieu; Jacobs, Kris

    Equity options display a strong factor structure. The first principal components of the equity volatility levels, skews, and term structures explain a substantial fraction of the cross-sectional variation. Furthermore, these principal components are highly correlated with the S&P500 index option...... volatility, skew, and term structure respectively. We develop an equity option valuation model that captures this factor structure. The model predicts that firms with higher market betas have higher implied volatilities, steeper moneyness slopes, and a term structure that co-varies more with the market...

  18. Perpetual American options within CTRWs

    Science.gov (United States)

    Montero, Miquel

    2008-06-01

    Continuous-time random walks are a well suited tool for the description of market behaviour at the smallest scale: the tick-to-tick evolution. We will apply this kind of market model to the valuation of perpetual American options: derivatives with no maturity that can be exercised at any time. Our approach leads to option prices that fulfill financial formulas when canonical assumptions on the dynamics governing the process are made, but it is still suitable for more exotic market conditions.

  19. Perpetual American options within CTRW's

    OpenAIRE

    Montero, Miquel

    2007-01-01

    Continuous-time random walks are a well suited tool for the description of market behaviour at the smallest scale: the tick-to-tick evolution. We will apply this kind of market model to the valuation of perpetual American options: derivatives with no maturity that can be exercised at any time. Our approach leads to option prices that fulfil financial formulas when canonical assumptions on the dynamics governing the process are made, but it is still suitable for more exotic market conditions.

  20. Over-valuation: avoid double counting when retaining dividends in the FCFE valuation

    OpenAIRE

    Silva, J. M.; Pereira, J. A.

    2017-01-01

    Valuation based on DCF (Discounted Cash Flow) has been the dominant valuation procedure during the last decades. In spite of this dominance, enterprise valuation using the discounted FCF (Free Cash Flow) model has some practical drawbacks, since there is often some confusion on how to effectively use it. Commonly, the valuation procedures start by estimating future FCF figures from historical data, such as mean FCF, growth and retention ratio, alongside many other variables. These FCF forecas...

  1. Valuation of intangible assets

    OpenAIRE

    Karlíková, Jitka

    2010-01-01

    The thesis is focused on the valuation of intangible assets, particularly trademarks and copyrights. In the beginning it deals with the problems of valuation of intangible assets. The main part of the thesis provides an overview of methods for valuation of intangible assets. This part is followed by a practical section that illustrates the procedure of valuation of trademarks and copyrights on a concrete example.

  2. Modelling and computation in the valuation of carbon derivatives with stochastic convenience yields.

    Science.gov (United States)

    Chang, Shuhua; Wang, Xinyu

    2015-01-01

    The anthropogenic greenhouse gas (GHG) emission has risen dramatically during the last few decades, which mainstream researchers believe to be the main cause of climate change, especially the global warming. The mechanism of market-based carbon emission trading is regarded as a policy instrument to deal with global climate change. Although several empirical researches about the carbon allowance and its derivatives price have been made, theoretical results seem to be sparse. In this paper, we theoretically develop a mathematical model to price the CO2 emission allowance derivatives with stochastic convenience yields by the principle of absence of arbitrage opportunities. In the case of American options, we formulate the pricing problem to a linear parabolic variational inequality (VI) in two spatial dimensions and develop a power penalty method to solve it. Then, a fitted finite volume method is designed to solve the nonlinear partial differential equation (PDE) resulting from the power penalty method and governing the futures, European and American option valuation. Moreover, some numerical results are performed to illustrate the efficiency and usefulness of this method. We find that the stochastic convenience yield does effect the valuation of carbon emission derivatives. In addition, some sensitivity analyses are also made to examine the effects of some parameters on the valuation results.

  3. Modelling and computation in the valuation of carbon derivatives with stochastic convenience yields.

    Directory of Open Access Journals (Sweden)

    Shuhua Chang

    Full Text Available The anthropogenic greenhouse gas (GHG emission has risen dramatically during the last few decades, which mainstream researchers believe to be the main cause of climate change, especially the global warming. The mechanism of market-based carbon emission trading is regarded as a policy instrument to deal with global climate change. Although several empirical researches about the carbon allowance and its derivatives price have been made, theoretical results seem to be sparse. In this paper, we theoretically develop a mathematical model to price the CO2 emission allowance derivatives with stochastic convenience yields by the principle of absence of arbitrage opportunities. In the case of American options, we formulate the pricing problem to a linear parabolic variational inequality (VI in two spatial dimensions and develop a power penalty method to solve it. Then, a fitted finite volume method is designed to solve the nonlinear partial differential equation (PDE resulting from the power penalty method and governing the futures, European and American option valuation. Moreover, some numerical results are performed to illustrate the efficiency and usefulness of this method. We find that the stochastic convenience yield does effect the valuation of carbon emission derivatives. In addition, some sensitivity analyses are also made to examine the effects of some parameters on the valuation results.

  4. Modelling and Computation in the Valuation of Carbon Derivatives with Stochastic Convenience Yields

    Science.gov (United States)

    Chang, Shuhua; Wang, Xinyu

    2015-01-01

    The anthropogenic greenhouse gas (GHG) emission has risen dramatically during the last few decades, which mainstream researchers believe to be the main cause of climate change, especially the global warming. The mechanism of market-based carbon emission trading is regarded as a policy instrument to deal with global climate change. Although several empirical researches about the carbon allowance and its derivatives price have been made, theoretical results seem to be sparse. In this paper, we theoretically develop a mathematical model to price the CO2 emission allowance derivatives with stochastic convenience yields by the principle of absence of arbitrage opportunities. In the case of American options, we formulate the pricing problem to a linear parabolic variational inequality (VI) in two spatial dimensions and develop a power penalty method to solve it. Then, a fitted finite volume method is designed to solve the nonlinear partial differential equation (PDE) resulting from the power penalty method and governing the futures, European and American option valuation. Moreover, some numerical results are performed to illustrate the efficiency and usefulness of this method. We find that the stochastic convenience yield does effect the valuation of carbon emission derivatives. In addition, some sensitivity analyses are also made to examine the effects of some parameters on the valuation results. PMID:26010900

  5. THEORETICAL FOUNDATIONS EFFICIENT MASS VALUATION

    Directory of Open Access Journals (Sweden)

    Koshel A.

    2016-08-01

    Full Text Available In the article the theoretical basis for determining the effectiveness of mass valuation of land in present-day conditions are described. The concept defenitsy effect and effectiveness as economic categories and their classification values for mass valuation of land are presented. The effectiveness of mass valuation of land in the settlements defines the structure of local budget and economic activities undertaken by local authorities on the basis of the results of the mass appraisal of real estate. Mass valuation is regular and it is characterized by high degree of standardization of procedures and a significant increase in the role of statistical methods for processing data related to the use of the most significant factors influencing the parameters of the object to its cost, as well as the need to determine the value of the objective laws change equivalent, which is only possible when using economic and mathematical methods and statistical analysis. Quality control results of mass valuation carried out principally in other ways, as obtained by applying statistical machine results can be checked as soon statistical methods. This shows the relevance of research topic and lack of elaboration for Ukraine problems of efficiency of mass land valuation. Scientific research conducted through the use of the dialectical method and techniques of abstraction, comparative analysis and synthesis, the article various models and methods of valuation of land for taxation purposes are analyzed. In addition, the group explored methods used, comparisons, and more. In economic theory and practice problems and determine the effect of efficiency aimed at profit is quite relevant. Economists consider cost-effectiveness, such as economic efficiency. In this case, the production can be attributed to the activities to conduct and organization of mass valuation of land. This pushes many different positions on criteria and indicators of economic efficiency, the

  6. An Economic Evaluation on Replacement Plan for Aged Thermal Power Plants through a Real Option Approach

    Science.gov (United States)

    Kato, Moritoshi; Zhou, Yicheng

    This paper presents a novel method to evaluate replacement plan for aged thermal power plants under uncertain circumstances through a real option approach. The most economical plan is selected among the three options: an option to operate an existing oil-fired thermal plant, an option to mothball it, and an option to abandon it and to construct an advanced gas combined cycle power plant (ACC) at the same time. Basic ideas of our model are: we use quadranomial approach in order to evaluate an option value consisted by two different uncertain assets; we consider cash flow with a dividend in order to reflect conditions of an aged oil-fired thermal plant and use the sequential compound option approach; we evaluate replacement time using quadranomial decision tree taking into account the options. We also analyze value and time of replacement using numerical examples. Our proposed method will be practically used for generation planning. For example it is possible to make priority quantitatively in replacements of aged thermal power plants by real option values. The target year of replacement may be set as a year when cumulative probability of replacement becomes over certain level.

  7. On option purchase agreements for new generation capacity

    International Nuclear Information System (INIS)

    Ramesh, V.C.

    1996-01-01

    Given the increasing competition in the power generation sector, and the resulting uncertainty surrounding long-term investments in new generation projects, utilities are beginning to hedge their risks using financial instruments called options. The purpose of this paper is to explain, in a tutorial fashion, the issues involved in an option contract for new generation capacity (long-term firm energy). Particular emphasis is placed on the valuation of such options. The concepts are explained with illustrative examples

  8. Social impact analysis: monetary valuation

    Science.gov (United States)

    Wainger, Lisa A.; Johnston, Robert J.; Bagstad, Kenneth J.; Casey, Frank; Vegh, Tibor

    2014-01-01

    This section provides basic guidance for using and conducting economic valuation, including criteria for judging whether valuation is appropriate for supporting decisions. It provides an introduction to the economic techniques used to measure changes in social welfare and describes which methods may be most appropriate for use in valuing particular ecosystem services. Rather than providing comprehensive valuation instructions,it directs readers to additional resources.More generally, it establishes that the valuation of ecosystem services is grounded in a long history of non-market valuation and discusses how ecosystem services valuation can be conducted within established economic theory and techniques.

  9. Ecosystem service valuations of mangrove ecosystems to inform decision making and future valuation exercises.

    Directory of Open Access Journals (Sweden)

    Nibedita Mukherjee

    Full Text Available The valuation of ecosystem services is a complex process as it includes several dimensions (ecological, socio-cultural and economic and not all of these can be quantified in monetary units. The aim of this paper is to conduct an ecosystem services valuation study for mangroves ecosystems, the results of which can be used to inform governance and management of mangroves. We used an expert-based participatory approach (the Delphi technique to identify, categorize and rank the various ecosystem services provided by mangrove ecosystems at a global scale. Subsequently we looked for evidence in the existing ecosystem services literature for monetary valuations of these ecosystem service categories throughout the biogeographic distribution of mangroves. We then compared the relative ranking of ecosystem service categories between the monetary valuations and the expert based analysis. The experts identified 16 ecosystem service categories, six of which are not adequately represented in the literature. There was no significant correlation between the expert based valuation (the Delphi technique and the economic valuation, indicating that the scope of valuation of ecosystem services needs to be broadened. Acknowledging this diversity in different valuation approaches, and developing methodological frameworks that foster the pluralism of values in ecosystem services research, are crucial for maintaining the credibility of ecosystem services valuation. To conclude, we use the findings of our dual approach to valuation to make recommendations on how to assess and manage the ecosystem services provided by mangrove ecosystems.

  10. Ecosystem service valuations of mangrove ecosystems to inform decision making and future valuation exercises.

    Science.gov (United States)

    Mukherjee, Nibedita; Sutherland, William J; Dicks, Lynn; Hugé, Jean; Koedam, Nico; Dahdouh-Guebas, Farid

    2014-01-01

    The valuation of ecosystem services is a complex process as it includes several dimensions (ecological, socio-cultural and economic) and not all of these can be quantified in monetary units. The aim of this paper is to conduct an ecosystem services valuation study for mangroves ecosystems, the results of which can be used to inform governance and management of mangroves. We used an expert-based participatory approach (the Delphi technique) to identify, categorize and rank the various ecosystem services provided by mangrove ecosystems at a global scale. Subsequently we looked for evidence in the existing ecosystem services literature for monetary valuations of these ecosystem service categories throughout the biogeographic distribution of mangroves. We then compared the relative ranking of ecosystem service categories between the monetary valuations and the expert based analysis. The experts identified 16 ecosystem service categories, six of which are not adequately represented in the literature. There was no significant correlation between the expert based valuation (the Delphi technique) and the economic valuation, indicating that the scope of valuation of ecosystem services needs to be broadened. Acknowledging this diversity in different valuation approaches, and developing methodological frameworks that foster the pluralism of values in ecosystem services research, are crucial for maintaining the credibility of ecosystem services valuation. To conclude, we use the findings of our dual approach to valuation to make recommendations on how to assess and manage the ecosystem services provided by mangrove ecosystems.

  11. What's it worth? A general manager's guide to valuation.

    Science.gov (United States)

    Luehrman, T A

    1997-01-01

    Behind every major resource-allocation decision a company makes lies some calculation of what that move is worth. So it is not surprising that valuation is the financial analytical skill general managers want to learn more than any other. Managers whose formal training is more than a few years old, however, are likely to have learned approaches that are becoming obsolete. What do generalists need in an updated valuation tool kit? In the 1970s, discounted-cash-flow analysis (DCF) emerged as best practice for valuing corporate assets. And one version of DCF-using the weighted-average cost of capital (WACC)-became the standard. Over the years, WACC has been used by most companies as a one-size-fits-all valuation tool. Today the WACC standard is insufficient. Improvements in computers and new theoretical insights have given rise to tools that outperform WACC in the three basic types of valuation problems managers face. Timothy Luehrman presents an overview of the three tools, explaining how they work and when to use them. For valuing operations, the DCF methodology of adjusted present value allows managers to break a problem into pieces that make managerial sense. For valuing opportunities, option pricing captures the contingent nature of investments in areas such as R&D and marketing. And for valuing ownership claims, the tool of equity cash flows helps managers value their company's stake in a joint venture, a strategic alliance, or an investment that uses project financing.

  12. Exotic Options: a Chooser Option and its Pricing

    Directory of Open Access Journals (Sweden)

    Raimonda Martinkutė-Kaulienė

    2012-12-01

    Full Text Available Financial instruments traded in the markets and investors’ situation in such markets are getting more and more complex. This leads to more complex derivative structures used for hedging that are harder to analyze and which risk is harder managed. Because of the complexity of these instruments, the basic characteristics of many exotic options may sometimes be not clearly understood. Most scientific studies have been focused on developing models for pricing various types of exotic options, but it is important to study their unique characteristics and to understand them correctly in order to use them in proper market situations. The paper examines main aspects of options, emphasizing the variety of exotic options and their place in financial markets and risk management process. As the exact valuation of exotic options is quite difficult, the article deals with the theoretical and practical aspects of pricing of chooser options that suggest a broad range of usage and application in different market conditions. The calculations made in the article showed that the price of the chooser is closely correlated with the choice time and low correlated with its strike price. So the first mentioned factor should be taken into consideration when making appropriate hedging and investing decisions.

  13. Valuation of large variable annuity portfolios: Monte Carlo simulation and synthetic datasets

    Directory of Open Access Journals (Sweden)

    Gan Guojun

    2017-12-01

    Full Text Available Metamodeling techniques have recently been proposed to address the computational issues related to the valuation of large portfolios of variable annuity contracts. However, it is extremely diffcult, if not impossible, for researchers to obtain real datasets frominsurance companies in order to test their metamodeling techniques on such real datasets and publish the results in academic journals. To facilitate the development and dissemination of research related to the effcient valuation of large variable annuity portfolios, this paper creates a large synthetic portfolio of variable annuity contracts based on the properties of real portfolios of variable annuities and implements a simple Monte Carlo simulation engine for valuing the synthetic portfolio. In addition, this paper presents fair market values and Greeks for the synthetic portfolio of variable annuity contracts that are important quantities for managing the financial risks associated with variable annuities. The resulting datasets can be used by researchers to test and compare the performance of various metamodeling techniques.

  14. Valuation of Transactive Systems

    Energy Technology Data Exchange (ETDEWEB)

    Hammerstrom, Donald J. [Pacific Northwest National Lab. (PNNL), Richland, WA (United States); Corbin, Charles D. [Pacific Northwest National Lab. (PNNL), Richland, WA (United States); Fernandez, Nicholas [Pacific Northwest National Lab. (PNNL), Richland, WA (United States); Homer, Juliet S. [Pacific Northwest National Lab. (PNNL), Richland, WA (United States); Makhmalbaf, Atefe [Pacific Northwest National Lab. (PNNL), Richland, WA (United States); Pratt, Robert G. [Pacific Northwest National Lab. (PNNL), Richland, WA (United States); Somani, Abhishek [Pacific Northwest National Lab. (PNNL), Richland, WA (United States); Gilbert, Erik I. [Navigant Consulting, Boulder, CO (United States); Chandler, Shawn [Navigant Consulting, Portland, OR (United States); Shandross, Richard [Navigant Consulting, Burlington, MA (United States)

    2016-05-12

    This is a final report from a project funded by the U.S. Department of Energy to formulate and test a methodology for valuation of systems where transaction-based mechanisms coordinate the exchange of value between the system’s actors. Today, the principal commodity being exchanged is electrical energy, and such mechanisms are called transactive energy systems. The authors strove to lay a foundation for meaningful valuations of transactive systems in general, and transactive energy systems as a special case. The word valuation is used in many different ways. This report proposes a valuation methodology that is inclusive of many types of valuations. Many will be familiar with cost-benefit valuations, in which both costs and benefits are assessed to determine whether the assets are worth their cost. Another set of valuation methods attempt to optimize an outcome using available resources, as is the case with integrated resource planning. In the end, this report’s methodology was most influenced by and most resembles the integrated-resource-planning approach. Regardless, we wish to enforce the premise that all valuations are comparative and should clearly specify a baseline scenario. A long, annotated list of prior valuation studies and valuation methodologies that influenced this report has been appended to this report. Much research is being conducted today concerning transactive systems, but only a handful of transactive system mechanisms have been formulated and field tested. They are found to be quite diverse, and the documentation of the various mechanisms is uneven in breadth and quality. It is therefore not adequate to simply assert that a valuation scenario includes a transactive system; certain characteristics and qualities of the chosen transactive system mechanism must be defined and stated. The report lists and discusses most of the known transactive system mechanisms. It offers a set of questions that may be used to help specify important

  15. The Q theory of investment, the capital asset pricing model, and asset valuation: a synthesis.

    Science.gov (United States)

    McDonald, John F

    2004-05-01

    The paper combines Tobin's Q theory of real investment with the capital asset pricing model to produce a new and relatively simple procedure for the valuation of real assets using the income approach. Applications of the new method are provided.

  16. Renewable energy policy evaluation using real option model. The case of Taiwan

    International Nuclear Information System (INIS)

    Lee, Shun-Chung; Shih, Li-Hsing

    2010-01-01

    This study presents a policy benefit evaluation model that integrates cost efficiency curve information on renewable power generation technologies into real options analysis (ROA) methods. The proposed model evaluates quantitatively the policy value provided by developing renewable energy (RE) in the face of uncertain fossil fuel prices and RE policy-related factors. The economic intuition underlying the policy-making process is elucidated, while empirical analysis illustrates the option value embedded in the current development policy in Taiwan for wind power. In addition to revealing the benefits that RE development provides when considering real options, analytical results indicate that ROA is a highly effective means of quantifying how policy planning uncertainty including managerial flexibility influences RE development. In addition to assessing the policy value of current RE development policy, this study also compares policy values in terms of internalized external costs and varying feed-in tariff (FIT). Simulation results demonstrate that the RE development policy with internalized CO 2 emission costs is appropriate policy planning from sustainability point of view. Furthermore, relationship between varying FIT and policy values can be shown quantitatively and appropriate FIT level could be determined accordingly. (author)

  17. 26 CFR 20.6324B-1 - Special lien for additional estate tax attributable to farm, etc., valuation.

    Science.gov (United States)

    2010-04-01

    ... attributable to farm, etc., valuation. 20.6324B-1 Section 20.6324B-1 Internal Revenue INTERNAL REVENUE SERVICE... attributable to farm, etc., valuation. (a) General rule. In the case of an estate of a decedent dying after December 31, 1976, which includes any interest in qualified real property, if the executor elects to value...

  18. Neural Networks as Semiparametric Option Pricing Tool

    Czech Academy of Sciences Publication Activity Database

    Baruník, Jozef; Baruníková, M.

    2011-01-01

    Roč. 18, č. 28 (2011), s. 66-83 ISSN 1212-074X R&D Projects: GA ČR GD402/09/H045; GA ČR GA402/09/0965 Grant - others:GA ČR(CZ) GA402/09/0732 Institutional research plan: CEZ:AV0Z10750506 Keywords : option valuation * neural network * S&P 500 index options Subject RIV: AH - Economics http://library.utia.cas.cz/separaty/2011/E/barunik-0367688.pdf

  19. Accounting treatment of currency options

    Directory of Open Access Journals (Sweden)

    Prošić Danica

    2016-01-01

    Full Text Available Currency options are often used to mitigate currency risk resulting from corporate activities. Their implementation can be complex, and there could be problems if the essential elements and principles are not fully understood. Although they are not the simplest financial products, currency options are interesting and useful to those who are trying to make a step forward in the area of currency risk management. This paper aims to present the general principles and specifics of accounting records and valuation of currency options used for hedging against risk. It is a complex process which, in addition to numerous conditions, also involves the implementation of accounting rules that deviate from the generally accepted accounting principles.

  20. Hering S.A. Valuation

    Directory of Open Access Journals (Sweden)

    Roberto Fukuzawa

    2017-07-01

    Full Text Available The case studies real investment decisions and firm valuation. Hering S.A is a textile and retail clothing company listed in BM&FBovespa stock exchange. This case, based on newspaper articles and public information detailed in the text, (i enables the students to analyze the real investment decisions taken by investors that bought Hering´s stocks and at the same time (ii challenges the students to formulate assumptions to value the firm based on public information such as: financial statements, macroeconomic indicators and other market variables. The result obtained by the students can be confronted in the classroom for further discussion about (i the assumptions used and (ii the stock prices calculated. Such discussion can explicit the biases arising from the motivation of the evaluators considering that different assumptions may have been adopted based on different interests (buyer’s, seller’s, etc..

  1. Consumption-based Equity Valuation

    DEFF Research Database (Denmark)

    Bach, Christian; Christensen, Peter O.

    2016-01-01

    implementations of standard valuation models, both in terms of median absolute valuation errors (MAVE) and in terms of excess returns on simple investment strategies based on the differences between model and market prices. The CCAPM-based valuation model yields a significantly lower MAVE than the best performing...... standard valuation model. Both types of models can identify investment strategies with subsequent excess returns. The CCAPM-based valuation model yields time-series of realized hedge returns with more and higher positive returns and fewer and less negative returns compared with the time-series of realized...... through a risk-adjusted cost of equity in the denominator. The risk adjustments are derived based on assumptions about the time-series properties of residual income returns and aggregate consumption rather than on historical stock returns. We compare the performance of the model with several...

  2. Valuation of design adaptability in aerospace systems

    Science.gov (United States)

    Fernandez Martin, Ismael

    As more information is brought into early stages of the design, more pressure is put on engineers to produce a reliable, high quality, and financially sustainable product. Unfortunately, requirements established at the beginning of a new project by customers, and the environment that surrounds them, continue to change in some unpredictable ways. The risk of designing a system that may become obsolete during early stages of production is currently tackled by the use of robust design simulation, a method that allows to simultaneously explore a plethora of design alternatives and requirements with the intention of accounting for uncertain factors in the future. Whereas this design technique has proven to be quite an improvement in design methods, under certain conditions, it fails to account for the change of uncertainty over time and the intrinsic value embedded in the system when certain design features are activated. This thesis introduces the concepts of adaptability and real options to manage risk foreseen in the face of uncertainty at early design stages. The method described herein allows decision-makers to foresee the financial impact of their decisions at the design level, as well as the final exposure to risk. In this thesis, cash flow models, traditionally used to obtain the forecast of a project's value over the years, were replaced with surrogate models that are capable of showing fluctuations on value every few days. This allowed a better implementation of real options valuation, optimization, and strategy selection. Through the option analysis model, an optimization exercise allows the user to obtain the best implementation strategy in the face of uncertainty as well as the overall value of the design feature. Here implementation strategy refers to the decision to include a new design feature in the system, after the design has been finalized, but before the end of its production life. The ability to do this in a cost efficient manner after the system

  3. A Real Options Analysis of Coffee Planting in Vietnam

    OpenAIRE

    Luong, Quoc; Tauer, Loren W.

    2004-01-01

    Vietnam grew from an insignificant to the world’s second largest coffee producer during the 1990s. To understand this growth, this paper examines Vietnamese coffee growers’ investment decisions using real options theory. The study finds that producers, with variable costs of 19 cents/lb and total cost of 29.3 cents/lb, would enter coffee production at a coffee price of 47 cents/lb and exit at a coffee price of 14 cents/lb. Most Vietnamese growers appear to be sufficiently efficient to continu...

  4. MODERN OPTIONS FOR THE FINANCING OF THE REAL ESTATE INVESTMENTS

    Directory of Open Access Journals (Sweden)

    Chiriac Silviu-Cornel-Virgil

    2015-07-01

    Full Text Available The investments represent one of the most important elements in the national economy development strategies, as well as in all the business fields and branches. The notion of investment is extremely complex, perceived with different meanings and significates. In a general, wider meaning the investments represent a capital placement which is made with the purpose of obtaining profit bearing incomes in the future. In a narrower meaning, investments mean the totality of expenses made for obtaining capital assets which are future potential factors in the formation of incomes. Investments represent the most important factor in the development strategies of the national economy as well as in all the business fields and branches. The investment strategy represents an important element in the management of the investments and a component of the general strategy of the entity. The use of investment strategies in the management activity implies the application of scientific techniques and methods. The great number of studies carried out shows that there were no certain answers formed, very often the option for a form of financing or the other is influenced only by the “level of accessibility” of the resources available on the financial market and the financing policy of many companies is guided rather by the constraints of the financial market than a coherent company strategy In order to ensure a constant economic growth it is necessary to prepare investment projects. In practice the predominant one is the investment activity based on real investments performed for the modernising of assets, in order to ensure their physical and moral wear and tear. The analysis of real estate investments can be made using a various range of indicators, from the traditional ones to those based on the updated cash flow, using traditional analysis techniques or complex techniques used by specialists with training in the analysis of real estate investment. The

  5. Impact of the european emission trading scheme for the air transportation industry on the valuation of aircraft purchase rights

    International Nuclear Information System (INIS)

    Tarradellas-Espuny, J.; Salamero-Salas, A.; Martinez-Costa, C.

    2009-01-01

    The European Commission issued a legislative proposal in December 2006, suggesting a cap on CO 2 emissions for all planes arriving or departing from EU airports, while allowing airlines to buy and sell pollution credits on the EU carbon market (Emission Trading Scheme, or ETS). In 2008 the new scheme got the final approval. Real options appear to be ab appropriate methodology to capture the extra value brought by the new legislation on new airplane purchase rights: The airline will surely have the purchase right to the new plane if the operation of the plane generates unused pollution credits that the airline can sell at a minimum price in the carbon market. This paper tries to determine if the impact of ETS in the valuation of aircraft purchase rights is significant enough in monetary terms to include the new legislation in a complex real-option model already proposed by the authors recently. The research concludes that even the impact of ETS justifies its inclusion in the model, the quality of the available sets of historical data still raises some questions. Particularly, the assumption of market efficiency for the Carbon Pool over the recent years needs to be treated with caution. (Author) 9 refs

  6. Designing flexible engineering systems utilizing embedded architecture options

    Science.gov (United States)

    Pierce, Jeff G.

    This dissertation develops and applies an integrated framework for embedding flexibility in an engineered system architecture. Systems are constantly faced with unpredictability in the operational environment, threats from competing systems, obsolescence of technology, and general uncertainty in future system demands. Current systems engineering and risk management practices have focused almost exclusively on mitigating or preventing the negative consequences of uncertainty. This research recognizes that high uncertainty also presents an opportunity to design systems that can flexibly respond to changing requirements and capture additional value throughout the design life. There does not exist however a formalized approach to designing appropriately flexible systems. This research develops a three stage integrated flexibility framework based on the concept of architecture options embedded in the system design. Stage One defines an eight step systems engineering process to identify candidate architecture options. This process encapsulates the operational uncertainty though scenario development, traces new functional requirements to the affected design variables, and clusters the variables most sensitive to change. The resulting clusters can generate insight into the most promising regions in the architecture to embed flexibility in the form of architecture options. Stage Two develops a quantitative option valuation technique, grounded in real options theory, which is able to value embedded architecture options that exhibit variable expiration behavior. Stage Three proposes a portfolio optimization algorithm, for both discrete and continuous options, to select the optimal subset of architecture options, subject to budget and risk constraints. Finally, the feasibility, extensibility and limitations of the framework are assessed by its application to a reconnaissance satellite system development problem. Detailed technical data, performance models, and cost estimates

  7. Mainstreaming Disaster Risk Management for Finance: Application of Real Options Method for Disaster Risk Sensitive Project

    Directory of Open Access Journals (Sweden)

    KUSDHIANTO SETIAWAN

    Full Text Available This paper discusses the application of real options analysis for a project that is in the process of construction and was affected by a natural disaster. The use of the analytical method has become a way of thinking in making decisions that should be taught to business school students. The case in this paper is based on an MBA thesis at the University of Gadjah Mada that was intended as a showcase for application of real options to address real business problems. It shows one of the strategies in mainstreaming disaster risk management in the business school that also answers the needs of businesses in the disaster-prone country.

  8. Industry Valuation Driven Earnings Management

    NARCIS (Netherlands)

    T. Jiao (Tao); G.M.H. Mertens (Gerard); P.G.J. Roosenboom (Peter)

    2007-01-01

    textabstractThis paper investigates whether industry valuation impacts firms’ earnings management decisions. Existing accounting literature assumes that industry valuation has a constant impact on this decision. We argue that a higher industry valuation increases the perceived benefits of earnings

  9. A Simple Approach to Interest-Rate Option Pricing.

    OpenAIRE

    Turnbull, Stuart M; Milne, Frank

    1991-01-01

    A simple introduction to contingent claim valuation of risky assets in a discrete time, stochastic interest-rate economy is provided. Taking the term structure of interest rates as exogenous, closed-form solutions are derived for European options written on (1) Treasury bills, (2) interest-rate forward contracts, (3) interest-rate futures contracts, (4) Treasury bonds, (5) interest-rate caps, (6) stock options, (7) equity forward contracts, (8) equity futures contracts, (9) Eurodollar liabili...

  10. Leveraged exchange-traded funds price dynamics and options valuation

    CERN Document Server

    Leung, Tim

    2016-01-01

    This book provides an analysis, under both discrete-time and continuous-time frameworks, on the price dynamics of leveraged exchange-traded funds (LETFs), with emphasis on the roles of leverage ratio, realized volatility, investment horizon, and tracking errors. This study provides new insights on the risks associated with LETFs. It also leads to the discussion of new risk management concepts, such as admissible leverage ratios and admissible risk horizon, as well as the mathematical and empirical analyses of several trading strategies, including static portfolios, pairs trading, and stop-loss strategies involving ETFs and LETFs. The final part of the book addresses the pricing of options written on LETFs. Since different LETFs are designed to track the same reference index, these funds and their associated options share very similar sources of randomness. The authors provide a no-arbitrage pricing approach that consistently value options on LETFs with different leverage ratios with stochastic volatility and ...

  11. Real Options in an Aymmetric Duopoly : Who Benefits from your Competitive Disadvantage

    NARCIS (Netherlands)

    Pawlina, G.; Kort, P.M.

    2001-01-01

    This paper considers the impact of investment cost asymmetry on the value and optimal real option exercise strategies of firms under imperfect competition.Both firms have an opportunity to invest in a project enhancing (ceteris paribus) the profit now.We show that three types of equilibria exist and

  12. Integral geometry and valuations

    CERN Document Server

    Solanes, Gil

    2014-01-01

    Valuations are finitely additive functionals on the space of convex bodies. Their study has become a central subject in convexity theory, with fundamental applications to integral geometry. In the last years there has been significant progress in the theory of valuations, which in turn has led to important achievements in integral geometry. This book originated from two courses delivered by the authors at the CRM and provides a self-contained introduction to these topics, covering most of the recent advances. The first part, by Semyon Alesker, is devoted to the theory of convex valuations, with emphasis on the latest developments. A special focus is put on the new fundamental structures of the space of valuations discovered after Alesker's irreducibility theorem. Moreover, the author describes the newly developed theory of valuations on manifolds. In the second part, Joseph H. G. Fu gives a modern introduction to integral geometry in the sense of Blaschke and Santaló, based on the notions and tools presented...

  13. Value assessment for reservoir recovery optimization

    International Nuclear Information System (INIS)

    Saito, R.; De Castro, G.N.; Mezzomo, C.; Schiozer, D.J.

    2001-01-01

    This paper analyzes the managerial flexibility embedded in oil and gas exploration and production. The analysis includes the economic impact of using different production techniques on the valuation of oil reserves. Two methodologies are used to evaluate the simulation of engineering techniques: (1) the real option approach; and (2) the discounted cash flow (DCF) method. Given the external variables (e.g., oil price, interest rate), this paper evaluates the best engineering technique for oil recovery by using a valuation approach. We conclude that by appropriately combining different production techniques, the value of oil reserves can increase under the real option approach and can be higher than the value assessed under the DCF method. Since oil recovery includes many managerial choices, we argue that the real option approach is more appropriate than the DCF method. The paper concludes that concession time and dividend yield are the most sensitive parameters for the valuation of oil reserves

  14. Value assessment for reservoir recovery optimization

    Energy Technology Data Exchange (ETDEWEB)

    Saito, R.; De Castro, G.N. [EAESP/FGV, Av. Nove de Julho, 2029-10 andar, 01313-902, SP Sao Paulo (Brazil); Mezzomo, C.; Schiozer, D.J. [Fundacao Getulio Vargas, Avenida Nove de Julho, 2029, 10th floor, 01313-902, SP Sao Paulo (Brazil)

    2001-12-29

    This paper analyzes the managerial flexibility embedded in oil and gas exploration and production. The analysis includes the economic impact of using different production techniques on the valuation of oil reserves. Two methodologies are used to evaluate the simulation of engineering techniques: (1) the real option approach; and (2) the discounted cash flow (DCF) method. Given the external variables (e.g., oil price, interest rate), this paper evaluates the best engineering technique for oil recovery by using a valuation approach. We conclude that by appropriately combining different production techniques, the value of oil reserves can increase under the real option approach and can be higher than the value assessed under the DCF method. Since oil recovery includes many managerial choices, we argue that the real option approach is more appropriate than the DCF method. The paper concludes that concession time and dividend yield are the most sensitive parameters for the valuation of oil reserves.

  15. When Do Firms Invest in Corporate Social Responsibility? : A Real Option Framework

    NARCIS (Netherlands)

    Cassimon, D.; Engelen, P.J.; Liedekerke, L.

    2014-01-01

    In this paper, the process for firms to decide whether or not to invest in corporate social responsibility is treated from a real option perspective. We extend the Husted (2005) framework with an important extra parameter that allows us to understand the timing of CSR investment and explain why some

  16. Cross currency swap valuation

    OpenAIRE

    Boenkost, Wolfram; Schmidt, Wolfgang M.

    2004-01-01

    Cross currency swaps are powerful instruments to transfer assets or liabilities from one currency into another. The market charges for this a liquidity premium, the cross currency basis spread, which should be taken into account by the valuation methodology. We describe and compare two valuation methods for cross currency swaps which are based upon using two different discounting curves. The first method is very popular in practice but inconsistent with single currency swap valuation methods....

  17. Real estate appraisal of land lots using GAMLSS models

    OpenAIRE

    Florencio, Lutemberg; Cribari-Neto, Francisco; Ospina, Raydonal

    2011-01-01

    The valuation of real estates (e.g., house, land, among others) is of extreme importance for decision making. Their singular characteristics make valuation through hedonic pricing methods dificult since the theory does not specify the correct regression functional form nor which explanatory variables should be included in the hedonic equation. In this article we perform real estate appraisal using a class of regression models proposed by Rigby & Stasinopoulos (2005): generalized additive mode...

  18. The valuation of environmental goods in Norway: A contingent valuation study with multiple bias testing

    Energy Technology Data Exchange (ETDEWEB)

    Strand, J.; Taraldset, A.

    1991-12-31

    We report on a study of contingent valuation of reduction in air pollution, and of a broader set of six environmental issues, among a population sample in Oslo. We derive an estimate of the extent of upward bias due to ``mental accouting`` in the expressed valuation of the air pollution issue, in two steps: (1) by comparing valuation of air pollution alone, with the same when the other issues at the same time are to be dealt with; and (2) by deriving the implicit valuation of the air pollution issue from the ranking of issues, and total valuation of all six issues. We find that expressed valuation of air pollution reductions are 3-4 times as high as the ``true`` values, and argue that this discrepancy is mainly due to mental account biases. We also test for strategic, starting point, information and interviewer biases, which are all present and, with the exception of the information bias, all in the expected directions. 9 refs., 4 tabs.

  19. Valuation relationships under growth

    OpenAIRE

    Benavides Franco, Julián

    2003-01-01

    One of the most important topics on valuation is the appropriate relationships between cash flows and rate of returns. I review those relationships under the premise, by Myers (1974), of the cost of debt as the right discount for the tax shield. Different hypotheses have been advanced for the tax shield risk, each one producing different valuation results, especially when growth is present. The consequences of some common mistakes on valuation are explored. One difference between the results ...

  20. Designing regulatory frameworks for merchant transmission investments by real options analysis

    International Nuclear Information System (INIS)

    Pringles, Rolando; Olsina, Fernando; Garcés, Francisco

    2014-01-01

    In deregulated electricity markets, the transmission network is a key infrastructure for enabling competition in the generation sector. A deficient expansion of the transmission grid prevents the realization of the benefits in terms of efficiency associated with market mechanisms. Consequently, it is essential to provide clear investment policies and economic signals to attract timely and efficient transmission investments in order to develop the system at minimum cost meeting the requirements of generators and consumers, while keeping adequate levels of service quality and reliability. This paper proposes a modern tool of economic evaluation based on real options analysis that provides the regulator the ability to assess various incentives that would lead transmission investors to make efficient decisions in highly uncertain environments. Real options properly values partially irreversible investment decisions, such as to defer, modify or abandon an investment project in response to the arrival of new information or as uncertainties are resolved. Decisions are evaluated from the point of view of a transmission investor trying to maximize its own profits in the time period set to recover the capital invested. The results allow the study of the behavior of transmission investors regarding their decision making when they have the possibility to manage the option to defer, under different regulatory schemes that encourage the expansion of the transmission system. - Highlights: • Regulatory frameworks for efficient and timely transmission expansions are designed. • Irreversibility and uncertainty of transmission investment is properly accounted for. • Response of network investors to regulatory incentives is quantitatively established

  1. The Organizational Valuation of Valuation Devices: Putting Lean whiteboard management to work in a hospital department

    Directory of Open Access Journals (Sweden)

    Amalie Martinus Hauge

    2016-12-01

    Full Text Available This paper is about the interplay between multiple modes of valuation. The paper engages with the question of how a valuation device intersects with the working values of an organization. While the many studies of valuation practices have drawn attention to the pervasive effects of valuation devices, only a few studies have taken into account the fact that many spaces, including organizations, are already filled with practices and ideas that constitute what is valuable. Revisiting classical organization theory, this paper shows that organizations comprise multiple, more - or less - integrated modes of valuation. Empirically, the paper draws on an ethnographic study of Lean management at a children's hospital, which is presented through analytical snapshots. The paper suggests that an organizational turn is relevant for valuation studies, as this fi rst allows an analytical expansion to include less 'deviced' valuations, contributes to the ongoing culture vs. device debate offering an alternative to the causal analysis of devices and effects without making the 'ineffable culture' what makes or breaks the causality.

  2. VALORACIÓN DEL RIESGO FINANCIERO (CFAR EN LAS EPS A TRAVÉS DE OPCIONES REALES: UNA APLICACIÓN AL NIVEL DE ATENCIÓN IV Financial Risk Valuation (CFARin EPS's through Real Options: An Application at the IV Assistance Level

    Directory of Open Access Journals (Sweden)

    Mónica A. Arango Arango

    2011-12-01

    Full Text Available El número de pacientes tratados por insuficiencia renal en Colombia es cada vez mayor; por esta razón conocer los costos asociados a esta enfermedad es una necesidad manifiesta de las Entidades Promotoras de Salud con el fin de garantizar la estabilidad del Sistema de Seguridad Social en Salud. Este trabajo evalúa financieramente, mediante opciones reales, la posibilidad de hacer un trasplante de riñón en un paciente bajo tratamiento de insuficiencia renal y el Flujo de Caja en Riesgo al tener en cuenta esta opción. Se encontró que al hacer un análisis periódico de los costos asociados a continuar con el tratamiento, existen casos en los que es más eficiente hacer el trasplante, disminuyendo el valor presente de las erogaciones del paciente, mejorando el flujo de caja en riesgo y controlando los gastos futuros de la entidad que lo atiende.Number of patients treated for renal failure in Colombia is increasingly high; for this reason, knowing the costs associated to this disease is a clear need for Health Promoting Entities with the purpose of assuring stability of the Health Social Security System. Through real options, this article is a financial evaluation of the possibility of conducting a kidney transplant in a patient being under a renal failure treatment and the cash flow at risk when having this as an option. It was found that when a periodical analysis of costs associated to continuation of treatment is made, there are cases where transplant is a more efficient option to be executed since the present value of the patient's expenses is decreased, thus improving the cash flow at risk and controlling future expenses of the entity treating the patient.

  3. Cost-effective design of ringwall storage hybrid power plants: A real options analysis

    International Nuclear Information System (INIS)

    Weibel, Sebastian; Madlener, Reinhard

    2015-01-01

    Highlights: • Economic viability, optimal size, and siting of a hybrid ringwall hydro power plant. • Real options analysis for optimal investment timing and stochastic storage volumes. • Stochastic PV and solar power production affects optimal size of the storage device. • Monte Carlo simulation is used for wind/solar power, el. price, and investment cost. • Numerical computations for two different hybrid ringwall storage plant scenarios. - Abstract: We study the economic viability and optimal sizing and siting of a hybrid plant that combines a ringwall hydro storage system with wind and solar power plants (ringwall storage hybrid power plant, RSHPP). A real options model is introduced to analyze the economics of an onshore RSHPP, and in particular of the varying storage volume in light of the stochastic character of wind and solar power, as well as the optimal investment timing under uncertainty. In fact, many uncertainties arise in such a project. Energy production is determined by the stochastic character of wind and solar power, and affects the optimal size of the storage device. Monte Carlo simulation is performed to analyze the following sources of uncertainty: (i) wind intensity and solar irradiation; (ii) future electricity price; and (iii) investment costs. The results yield the optimal size of the storage device; the energy market on which the operator should sell the electricity generated; numerical examples for two different RSHPP scenarios; and a real options model for analyzing the opportunity to defer the project investment and thus to exploit the value of waiting

  4. THEORETICAL ASPECTS REGARDING THE VALUATION OF INTANGIBLE ASSETS

    OpenAIRE

    HOLT GHEORGHE

    2015-01-01

    Valuation of intangible assets represents one of the most delicate problems of assessing a company. Usually, valuation of intangible assets is in the process of evaluating enterprise as a whole. Therefore, Intangible Asset Valuers must have detailed knowledge on business valuation, in particular, the income-based valuation methods (capitalization / updating net cash flow). Valuation of Intangible Assets is the objective of the International Valuation Standards (GN) 4 Valuation of Intangible A...

  5. VALUATION METHODS- LITERATURE REVIEW

    OpenAIRE

    Dorisz Talas

    2015-01-01

    This paper is a theoretical overview of the often used valuation methods with the help of which the value of a firm or its equity is calculated. Many experts (including Aswath Damodaran, Guochang Zhang and CA Hozefa Natalwala) classify the methods. The basic models are based on discounted cash flows. The main method uses the free cash flow for valuation, but there are some newer methods that reveal and correct the weaknesses of the traditional models. The valuation of flexibility of managemen...

  6. AN INITIAL DESIGN OF ISO 19152:2012 LADM BASED VALUATION AND TAXATION DATA MODEL

    DEFF Research Database (Denmark)

    Cagdas, Volkan; Kara, A.; van Oosterom, P.

    2016-01-01

    standard that defines the semantics of fiscal databases. The ISO 19152:2012 Land Administration Domain Model (LADM), as an international land administration standard focuses on legal requirements, but considers out of scope specifications of external information systems including valuation and taxation...... databases. However, it provides a formalism which allows for an extension that responds to the fiscal requirements. This paper introduces an initial version of a LADM – Fiscal Extension Module for the specification of databases used in immovable property valuation and taxation. The extension module....... It is expected that the initial version will be refined through further activities held by a possible joint working group under FIG Commission 7 (Cadastre and Land Management) and FIG Commission 9 (Valuation and the Management of Real Estate) in collaboration with other relevant international bodies....

  7. 17 CFR 240.15c3-1a - Options (Appendix A to 17 CFR 240.15c3-1).

    Science.gov (United States)

    2010-04-01

    ... option's class, at 10 equidistant intervals (valuation points) ranging from an assumed movement (both up... until the option's expiration; (4) The volatility of the underlying asset; (5) Any cash flows associated...

  8. 77 FR 56903 - Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and...

    Science.gov (United States)

    2012-09-14

    ... includes options with strike prices expressed in percentage terms. Values for such options would be expressed in percentage terms and would be theoretical values.\\8\\ \\6\\ ``Indicative'' values are indications... terms (the valuations provided to MDX must also be expressed in percentage terms). In addition...

  9. Real options approach to inter-sectoral migration of U.S.farm labor

    Science.gov (United States)

    Gulcan Onel; Barry K. Goodwin

    2014-01-01

    The core of the literature on inter-sectoral labor migration is based on net present value models of investment in which individuals are assumed to migrate to take advantage of positive wage differentials. In this article, we argue that a real options approach, taken together with the adjustment costs associated with sectoral relocation, may provide a basis for...

  10. The valuation of environmental goods in Norway: A contingent valuation study with multiple bias testing

    Energy Technology Data Exchange (ETDEWEB)

    Strand, J.; Taraldset, A.

    1991-01-01

    We report on a study of contingent valuation of reduction in air pollution, and of a broader set of six environmental issues, among a population sample in Oslo. We derive an estimate of the extent of upward bias due to mental accouting'' in the expressed valuation of the air pollution issue, in two steps: (1) by comparing valuation of air pollution alone, with the same when the other issues at the same time are to be dealt with; and (2) by deriving the implicit valuation of the air pollution issue from the ranking of issues, and total valuation of all six issues. We find that expressed valuation of air pollution reductions are 3-4 times as high as the true'' values, and argue that this discrepancy is mainly due to mental account biases. We also test for strategic, starting point, information and interviewer biases, which are all present and, with the exception of the information bias, all in the expected directions. 9 refs., 4 tabs.

  11. South African mine valuation

    Energy Technology Data Exchange (ETDEWEB)

    Storrar, C D

    1977-01-01

    This article sets out the basic concepts of mine valuation, with gold mining receiving more space than base minerals and coal. Sampling practice is given special attention. Chapter headings are methods of investigation, sampling, underground sampling, averaging of underground sampling, diamond-drill sampling, mass and mineral content of ore, organization of a sample office, working costs, mining pay limits, ore reserves, ore accounting, maintenance of grade, forecasting operations and life of mine, statistical mine valuation, state's share of profits and taxation, and financial valuation of mining ventures.

  12. Rational valuations

    Directory of Open Access Journals (Sweden)

    Georg Spielthenner

    2007-01-01

    Full Text Available Valuations are ubiquitous. We may be for or against genetically modified food; we find some politicians irresponsible; we prefer Beethoven to rock ‘n’ roll or vice versa; some enjoy bird-watching while others find it boring; and we may think that we have to tighten up on green-house gas emissions. Valuing is pervasive and often we are not even aware that we are valuing. However, many of ourvaluations are ill grounded and rationally defective. They are frequently based on misinformation, sloppy thinking, prejudice, and are biased in many ways as psychological research shows. For this reason there is widespread agreement among phi-losophers that we need an account of substantive valuational rationality, both for the theory of practical reasoning and for ethics as well. My main objectin this paper is to outline such an account and to present a principle that allows a non-technical rational criticism of valuations

  13. A real option-based model for promoting sustainable energy projects under the clean development mechanism

    International Nuclear Information System (INIS)

    Lee, Hyounkyu; Park, Taeil; Kim, Byungil; Kim, Kyeongseok; Kim, Hyoungkwan

    2013-01-01

    The clean development mechanism (CDM) provides a way of assisting sustainable development in developing countries for developed countries to reduce greenhouse gas (GHG) emissions. Despite its intended benefits, the primary CDM market decreased from US$5.8 billion in 2006 to US$1.5 billion in 2010. One of the primary reasons for the reduction of market size is that developed countries as investors have a high level of risks caused by the volatility of the market price for certified emission reductions (CERs). Another issue to be resolved is that developing countries as host countries cannot claim any right to the CERs produced on their own land. This paper presents a real option-based model for both parties (developed and developing countries) to have their fair share of profits and risks by controlling the uncertainty associated with the future value of CERs. A case study illustrated that the proposed model can effectively attract investors to CDM projects leading to mitigation of climate change. - Highlights: ► This study focused on the risks associated with the uncertainty of future CER value in CDM projects. ► A real option-based model was developed for both parties in CDM to have fair share of profit and risk. ► Key variables and boundary conditions were identified for application of real option to CDM. ► The model allowed both parties to own options, which have an identical value. ► Hydropower plant projects in Indonesia were used to illustrate the implementation of the model

  14. Rational Multi-curve Models with Counterparty-risk Valuation Adjustments

    DEFF Research Database (Denmark)

    Crépey, Stéphane; Macrina, Andrea; Nguyen, Tuyet Mai

    2016-01-01

    We develop a multi-curve term structure set-up in which the modelling ingredients are expressed by rational functionals of Markov processes. We calibrate to London Interbank Offer Rate swaptions data and show that a rational two-factor log-normal multi-curve model is sufficient to match market da...... with regulatory obligations. In order to compute counterparty-risk valuation adjustments, such as credit valuation adjustment, we show how default intensity processes with rational form can be derived. We flesh out our study by applying the results to a basis swap contract....... with accuracy. We elucidate the relationship between the models developed and calibrated under a risk-neutral measure Q and their consistent equivalence class under the real-world probability measure P. The consistent P-pricing models are applied to compute the risk exposures which may be required to comply...

  15. Applying real options in investment decisions relating to environmental pollution

    Energy Technology Data Exchange (ETDEWEB)

    Lin, Tyrone T. [Department of International Business, National Dong Hwa University, 1, Sec. 2, Da Hsueh Road, Shou-Feng, Hualien 974, Taiwan (China)]. E-mail: tjlin@mail.ndhu.edu.tw; Ko, C.-C. [Department of International Trade, Jin Wen Institute of Technology, Taiwan (China); Yeh, H.-N. [Graduate School of Management, Ming Chuan University, Taiwan (China)

    2007-04-15

    This study focuses on how to assess the optimal environmental investment decisions under economic and ecological uncertainty, and establishes the continuous time model using the real option approach to optimize environmental pollution policy. Unlike traditional cost benefit analysis, this work extends the model of [Pindyck, R.S., 2002. Optimal timing problems in environmental economics. Journal of Economic Dynamics and Control 26(9-10), 1677-1697], and attempts to identify the storage threshold of pollution stocks and the optimal timing for implementing environmental pollution decisions.

  16. Applying real options in investment decisions relating to environmental pollution

    International Nuclear Information System (INIS)

    Lin, Tyrone T.; Ko, C.-C.; Yeh, H.-N.

    2007-01-01

    This study focuses on how to assess the optimal environmental investment decisions under economic and ecological uncertainty, and establishes the continuous time model using the real option approach to optimize environmental pollution policy. Unlike traditional cost benefit analysis, this work extends the model of [Pindyck, R.S., 2002. Optimal timing problems in environmental economics. Journal of Economic Dynamics and Control 26(9-10), 1677-1697], and attempts to identify the storage threshold of pollution stocks and the optimal timing for implementing environmental pollution decisions

  17. Geoinformatic subsystem for real estate market analysis). (Polish Title: Podsystem geoinformatyczny do analizy rynku nieruchomosci)

    Science.gov (United States)

    Basista, A.

    2013-12-01

    There are many tools to manage spatial data. They called Geographic Information System (GIS), which apart from data visualization in space, let users make various spatial analysis. Thanks to them, it is possible to obtain more, essential information for real estate market analysis. Many scientific research present GIS exploitation to future mass valuation, because it is necessary to use advanced tools to manage such a huge real estates' data sets gathered for mass valuation needs. In practice, appraisers use rarely these tools for single valuation, because there are not many available GIS tools to support real estate valuation. The paper presents the functionality of geoinformatic subsystem, that is used to support real estate market analysis and real estate valuation. There are showed a detailed description of the process relied to attributes' inputting into the database and the attributes' values calculation based on the proposed definition of attributes' scales. This work presents also the algorithm of similar properties selection that was implemented within the described subsystem. The main stage of this algorithm is the calculation of the price creative indicator for each real estate, using their attributes' values. The set of properties, chosen in this way, are visualized on the map. The geoinformatic subsystem is used for the un-built real estates and living premises. Geographic Information System software was used to worked out this project. The basic functionality of gvSIG software (open source software) was extended and some extra functions were added to support real estate market analysis.

  18. Economic analysis of emerald ash borer (Coleoptera: Buprestidae) management options.

    Science.gov (United States)

    Vannatta, A R; Hauer, R H; Schuettpelz, N M

    2012-02-01

    Emerald ash borer, Agrilus planipennis (Fairmaire) (Coleoptera: Buprestidae), plays a significant role in the health and extent of management of native North American ash species in urban forests. An economic analysis of management options was performed to aid decision makers in preparing for likely future infestations. Separate ash tree population valuations were derived from the i-Tree Streets program and the Council of Tree and Landscape Appraisers (CTLA) methodology. A relative economic analysis was used to compare a control option (do-nothing approach, only removing ash trees as they die) to three distinct management options: 1) preemptive removal of all ash trees over a 5 yr period, 2) preemptive removal of all ash trees and replacement with comparable nonash trees, or 3) treating the entire population of ash trees with insecticides to minimize mortality. For each valuation and management option, an annual analysis was performed for both the remaining ash tree population and those lost to emerald ash borer. Retention of ash trees using insecticide treatments typically retained greater urban forest value, followed by doing nothing (control), which was better than preemptive removal and replacement. Preemptive removal without tree replacement, which was the least expensive management option, also provided the lowest net urban forest value over the 20-yr simulation. A "no emerald ash borer" scenario was modeled to further serve as a benchmark for each management option and provide a level of economic justification for regulatory programs aimed at slowing the movement of emerald ash borer.

  19. The option to expand a project: its assessment with the binomial options pricing model

    Directory of Open Access Journals (Sweden)

    Salvador Cruz Rambaud

    Full Text Available Traditional methods of investment appraisal, like the Net Present Value, are not able to include the value of the operational flexibility of the project. In this paper, real options, and more specifically the option to expand, are assumed to be included in the project information in addition to the expected cash flows. Thus, to calculate the total value of the project, we are going to apply the methodology of the Net Present Value to the different scenarios derived from the existence of the real option to expand. Taking into account the analogy between real and financial options, the value of including an option to expand is explored by using the binomial options pricing model. In this way, estimating the value of the option to expand is a tool which facilitates the control of the uncertainty element implicit in the project. Keywords: Real options, Option to expand, Binomial options pricing model, Investment project appraisal

  20. A real options approach to analyse wind energy investments under different support schemes

    International Nuclear Information System (INIS)

    Kitzing, Lena; Juul, Nina; Drud, Michael; Boomsma, Trine Krogh

    2017-01-01

    Highlights: • Real options model for wind projects considering investment timing and sizing. • Introducing a capacity constraint in the optimisation. • Addressing several uncertainty factors while still providing analytical solution. • Comparative policy analysis of investment incentives from different support schemes. • Improved quantification of trade-off between fast deployment and large projects. - Abstract: A real options model is developed to evaluate wind energy investments in a realistic and easily applicable way. Considering optimal investment timing and sizing (capacity choice), the model introduces a capacity constraint as part of the optimisation. Several correlated uncertainty factors are combined into a single stochastic process, which allows for analytical (closed-form) solutions. The approach is well suited for quantitative policy analysis, such as the comparison of different support schemes. A case study for offshore wind in the Baltic Sea quantifies differences in investment incentives under feed-in tariffs, feed-in premiums and tradable green certificates. Investors can under certificate schemes require up to 3% higher profit margins than under tariffs due to higher variance in profits. Feed-in tariffs may lead to 15% smaller project sizes. This trade-off between faster deployment of smaller projects and slower deployment of larger projects is neglected using traditional net present value approaches. In the analysis of such trade-off, previous real options studies did not consider a capacity constraint, which is here shown to decrease the significance of the effect. The impact on investment incentives also depends on correlations between the underlying stochastic factors. The results may help investors to make informed investment decisions and policy makers to strategically design renewable support and develop tailor-made incentive schemes.

  1. Analysis of Options Contract, Option Pricing in Agricultural Products

    Directory of Open Access Journals (Sweden)

    H. Tamidy

    2016-03-01

    Full Text Available Introduction: Risk is an essential component in the production and sale of agricultural products. Due to the nature of agricultural products, the people who act in this area including farmers and businesspersons encounter unpredictable fluctuations of prices. On the other hand, the firms that process agricultural products also face fluctuation of price of agricultural inputs. Given that the Canola is considered as one of the inputs of product processing factories, control of unpredictable fluctuations of the price of this product would increase the possibility of correct decision making for farmers and managers of food processing industries. The best available tool for control and management of the price risk is the use of future markets and options. It is evident that the pricing is the main pillar in every trade. Therefore, offering a fair price for the options will be very important. In fact, options trading in the options market create cost insurance stopped. In this way, which can reduce the risks of deflation created in the future, if the person entitled to the benefits of the price increase occurs in the future. Unlike the futures, market where the seller had to deliver the product on time, in the options market, there is no such compulsion. In addition, this is one of the strengths of this option contract, because if there is not enough product for delivery to the futures market as result of chilling, in due course, the farmers suffer, but in the options market there will be a loss. In this study, the setup options of rape, as a product, as well as inputs has been paid for industry. Materials and Methods: In this section. The selection criteria of the disposal of asset base for valuation of European put options and call option is been introduced. That for obtain this purpose, some characteristics of the goods must considered: 1-Unpredictable fluctuations price of underlying asset 2 -large underlying asset cash market 3- The possibility

  2. Valuation of Urban Commercial Properties in Nigeria for Secured Lending: Issues and Developments

    Directory of Open Access Journals (Sweden)

    Namnso Bassey Udoekanem

    2018-01-01

    Full Text Available Valuation for secured lending is required when an interest in real property is used as security for a loan. The outcome of such valuation will help the lending institution to achieve commercial prudence in lending as well as avoid taking undue risk. This paper examines the issues and developments in the valuation of urban commercial properties in Nigeria for secured lending purposes. It argues that due to the volatile nature of the Nigerian economy, coupled with the linkage between the economy and commercial property markets, the maximum amount of loan to be granted by lenders in the country using interest in commercial property as collateral should be based on the Mortgage Lending Value (MLV and not the Market Value (MV of the property, although the market value should also be reported in the valuation. A case study is used to demonstrate the valuation. It further contends that since the inputs for determining the MLV of a commercial property must be derived from long-term trends in the property and financial markets, it is more stable than MV when used to determine the maximum amount of mortgage loan to be granted by a lender. It concludes that the stability of the MLV makes it more reliable than the MV in achieving commercial prudence in mortgage lending as it fits into the long-term nature of mortgage loan repayment.

  3. Life cycle cost estimation and environmental valuation of coal mine tailings management

    Directory of Open Access Journals (Sweden)

    Joni Safaat Adiansyah

    2017-01-01

    Full Text Available Sustainable mining management is increasingly seen as an important issue in achieving a social license to operate for mining companies. This study describes the life cycle cost (LCC analysis and environmental valuation for several coal mine tailings management scenarios. The economic feasibility of six different options was assessed using the Net Present Value (NPV and Benefit-Cost Analysis (BCA methods. These options were belt press (OPT 1, tailings paste (OPT 2, thickened tailings (OPT 3, and OPT 1 with technology improvement and renewable energy sources (OPT 1A-C. The results revealed that OPT 1A (belt press technology with stack cell flotation was the first preference in terms of LCC while OPT 1C (belt press technology with stack cell flotation and 10% wind energy generated the highest benefits value (BCA compared to the other options. The LCC and BCA components and the volume of GHG emissions were used to determine the best option. Normalization of these three elements resulted in the selection of Option 1C as being the most cost-effective option.

  4. Equity Valuation

    DEFF Research Database (Denmark)

    Christensen, Peter Ove; Feltham, Gerald A.

    -coupon interest rates. We show that standard estimates of the cost of capital, based on historical stock returns, are likely to be a significantly biased measure of the firm’s cost of capital, but also that the bias is almost impossible to quantify empirically. The new approach recognizes that, in practice......We review and critically examine the standard approach to equity valuation using a constant risk-adjusted cost of capital, and we develop a new valuation approach discounting risk-adjusted fundamentals, such as expected free cash flows and residual operating income, using nominal zero...

  5. 77 FR 1107 - Self-Regulatory Organizations; Options Clearing Corporation; Notice of Filing of Proposed Rule...

    Science.gov (United States)

    2012-01-09

    ... Options Exchange have six customizable terms: (1) underlying index, (2) put or call, (3) expiration date..., and because the customizable terms of these OTC options are relatively limited and the range of values that customizable terms may be given is limited, OCC does not believe that valuation and risk...

  6. “Let’s Wait and See!” The Real Option to Switch as a Value Component of Customer Relationships

    NARCIS (Netherlands)

    Henseler, J.; Roemer, E.

    2013-01-01

    We suggest that a customer’s option to switch suppliers, and to wait and see before switching, adds to customer value in uncertain markets, and affects the customer’s switching behavior. We use a real options model to examine the value of this option and conduct sensitivity analyses based on data

  7. Valuation methods within the framework of life cycle assessment

    Energy Technology Data Exchange (ETDEWEB)

    Finnveden, G.

    1996-05-01

    Life Cycle Assessment Valuation methods are discussed. Different approaches for valuation are discussed as well as presently available valuation methods in relation to: * the values involved in the valuation, * the LCA framework, and * different applications of LCA. Among the conclusions are: * ethical and ideological valuations are involved not only when applying valuation weighting factors, but also when choosing valuation method and also when choosing whether to perform a valuation weighting or not, * it can be questioned whether straight distance-to-target methods are valuation methods, * it is still an open question whether presently available valuation methods produce meaningful and reliable information, * further development of quantitative valuation methods could concentrate both on different types of monetarisation methods and panel methods, * in many applications of LCA, the expected result is an identification of critical areas rather than a one-dimensional score, reducing the need for valuation methods. 88 refs, 3 figs, 4 tabs

  8. Fuzzy net present valuation based on risk assessment of Malaysian infrastructure

    Science.gov (United States)

    Shaffie, Siti Salihah; Jaaman, Saiful Hafizah; Mohamad, Daud

    2017-04-01

    In recent years, built-operate-transfer (BOT) projects have profoundly been accepted under project financing for infrastructure developments in many countries. It requires high financing and involves complex mutual risk. The assessment of the risks is vital to avert huge financial loss. Net present value is widely applied to BOT project where the uncertainties in cash flows are deemed to be deterministic values. This study proposed a fuzzy net present value model taking consideration the assessment of risks from the BOT project. The proposed model is adopted to provide more flexible net present valuation of the project. It is shown and proven that the improved fuzzy cash flow model will provide a valuation that is closed to the real value of the project.

  9. Time-consistent actuarial valuations

    NARCIS (Netherlands)

    Pelsser, A.A.J.; Salahnejhad Ghalehjooghi, A.

    2016-01-01

    Time-consistent valuations (i.e. pricing operators) can be created by backward iteration of one-period valuations. In this paper we investigate the continuous-time limits of well-known actuarial premium principles when such backward iteration procedures are applied. This method is applied to an

  10. Valuation of American Call Option Considering Uncertain Volatility

    Czech Academy of Sciences Publication Activity Database

    Hlaváček, Ivan

    2010-01-01

    Roč. 2, č. 2 (2010), s. 211-221 ISSN 2070-0733 R&D Projects: GA AV ČR(CZ) IAA100190803 Institutional research plan: CEZ:AV0Z10190503 Keywords : American options * parabolic variational inequality * uncertain parameter Subject RIV: BA - General Mathematics Impact factor: 0.510, year: 2010 http://www.global-sci.org/aamm/readabs.php?vol=2&no=2&doc=211&year=2010&ppage=221

  11. Option Valuation with Volatility Components, Fat Tails, and Nonlinear Pricing Kernels

    DEFF Research Database (Denmark)

    Babaoglu, Kadir Gokhan; Christoffersen, Peter; Heston, Steven

    We nest multiple volatility components, fat tails and a U-shaped pricing kernel in a single option model and compare their contribution to describing returns and option data. All three features lead to statistically significant model improvements. A second volatility factor is economically most i...

  12. Equity of cadastral valuation and simplified methods

    Directory of Open Access Journals (Sweden)

    Gianni Guerrieri

    2014-12-01

    Full Text Available Real estate taxation has been intensely debated lately. The main issue concerns the formation of taxable values based on the current cadastral incomes. More specifically, the point is made against the iniquity that the current surveyed values generate in the fiscal system, thus the necessity of overcoming it. It is known that the iniquity depends on the failed revision of valuation fees (related to the two-year period 1988-1989 and on the classification (sometimes still related to the urban cadastral as well as on the modalities used to calculate the taxable basis through the multipliers (the IMU ones, particularly. These are the expression of a conventional (and certainly distorting rate of return procedure which have become tools for the income variation. During the last twenty years, the Government and the Parliament have found the solution to the problem of iniquity in the revision of the current cadastral incomes. Nevertheless, they never managed to start a veritable reform process. In fact, during these years, they have just managed to introduce temporary measures as for instance paragraph 335 e 336 of article 1 of Law 311 of December 30th for the revision of the classification of some territorial backgrounds or of some real estate units, thus managing to control the most evident iniquities. Some other norms were approved in order to conduct remote surveys to identify properties which were never listed in the cadastre office. More than once, other possible suitable solutions have been discussed which could have been, with a fast implementation and low use of resources, a first step towards the recovery of an equity of real estate taxation. Unfortunately, these came out to be temporary measures all the same. Last in order and worth of mention is the Ministry of Economic and Finance document by the Finance and Economy Department (hereinafter MEF named “Ipotesi di revisione del prelievo sugli immobili” (Revision of real estate taxation

  13. Valuation of international oil- and gas companies

    International Nuclear Information System (INIS)

    Osmundsen, Petter; Mohn, Klaus; Espedal, Harald; Loevaas, Kjell

    2002-01-01

    In Norway, stock exchange quotation of Statoil has led to increased interest in valuation of oil companies. This article goes through the theory of corporate valuation. Then it compares the theory with practice, where valuation largely is built on accounts-based indicators. Taking the oil companies as a case, the article describes and evaluates the valuation methods used by analysts and investment banks

  14. The RealGas and RealGasH2O options of the TOUGH+ code for the simulation of coupled fluid and heat flow in tight/shale gas systems

    Science.gov (United States)

    We developed two new EOS additions to the TOUGH+ family of codes, the RealGasH2O and RealGas. The RealGasH2O EOS option describes the non-isothermal two-phase flow of water and a real gas mixture in gas reservoirs, with a particular focus in ultra-tight (such as tight-sand and sh...

  15. Valuing and timing R and D using a real options pricing framework; including an application to the development of Lunar Helium-3 fusion

    International Nuclear Information System (INIS)

    Ott, S.H.

    1992-01-01

    This dissertation uses the real options framework to study the valuation and optimal investment policies for R and D projects. The models developed integrate and extend the literature by taking into account the unique characteristics of such projects including uncertain investment in R and D, time-to-build, and multiple investment opportunities. The models were developed to examine the optimal R and D investment policy for the Lunar Helium-3 fusion project but have general applicability. Models are development which model R and D investment as an information gathering process where R and D investment remaining changes as investment is expended. The value of the project increased as the variance of required investment increases. An extension of this model combines a stochastic benefit with stochastic investment. Both the value of the R and D project and the region prescribing continued investment increased. The policy implications are significant: When uncertainty of R and D investment is ignored, the value of the project is underestimated and a tendency toward underinvestment in R and D will result; the existence of uncertainty in R and D investment will cause R and D projects to experience larger declines in value before discontinuation of investment. The model combining stochastic investment with the stochastic benefit is applied to the Lunar Helium-3 fusion project. Investment in fusion should continue at the maximum level of $1 billion annually given current levels of costs of alternative fuels and the perceived uncertainty of R and D investment in the project. A model is developed to examine the valuation and optimal split of funding between R and D projects when there are two competing new technologies. Without interaction between research expenditures and benefits across technologies, the optimal investment strategy is to invest in one or the other technology or neither. The multiple technology model is applied to analyze competing R and D projects, namely

  16. Three residual income valuation methods and discounted cash flow valuation

    OpenAIRE

    Fernandez, Pablo

    2003-01-01

    In this paper we show that the three residual Income models for equity valuation always yield the same value as the Discounted Cash Flow Valuation models. We use three residual income measures: Economic Profit, Economic Value Added (EVA) and Cash Value Added. We also show that economic profit and EVA are different, although Copeland, Koller and Murrin (2000, page 55) say that economic profit is a synonym of EVA. Specifically, we first show that the present value of the Economic Profit discoun...

  17. FINANCIAL STATEMENTS ANALYSIS AND FIRMS’ VALUATION IN VIETNAM

    OpenAIRE

    Kim, Trang Thu

    2009-01-01

    Valuation is the central focus in fundamental analysis. This dissertation considers the usefulness of financial statements in predicting market values of companies in Vietnam stock market by adopting the valuation model constructed by Chung et al., (2001). The overview of Vietnam stock market; some definitions about financial statements, valuation; description of several basis valuation models and empirical evidence including the description of valuation model developed by Chung et al., (2001...

  18. Pension plan asset valuation

    OpenAIRE

    Owadally, M. I; Haberman, S.

    2001-01-01

    Various asset valuation methods are used in the context of funding valuations. The motivation for such methods and their properties are briefly described. Some smoothed value or market-related methods based on arithmetic averaging and exponential smoothing are considered and their effect on funding is discussed. Suggestions for further research are also made.

  19. Valuation of the Prepayment Option of a Perpetual Corporate Loan

    Directory of Open Access Journals (Sweden)

    Timothee Papin

    2013-01-01

    margin of the loan is defined by the credit quality of the borrower and the liquidity cost that reflects the funding cost of the bank. Two frameworks are discussed: firstly a loan margin without liquidity cost and secondly a multiregime framework with a liquidity cost dependent on the regime. The prepayment option needs specific attention as the payoff itself is an implicit function of the parameters of the problem and of the dynamics. In the unique regime case, we establish quasianalytic formulas for the payoff of the option; in both cases we give a verification result that allows for the computation of the price of the option. Numerical results that implement the findings are also presented and are completely consistent with the theory; it is seen that when liquidity parameters are very different (i.e., when a liquidity crisis occurs in the high liquidity cost regime, the exercise domain may entirely disappear, meaning that it is not optimal for the borrower to prepay during such a liquidity crisis. The method allows for quantification and interpretation of these findings.

  20. A parabolic variational inequality arising from the valuation of strike reset options

    Science.gov (United States)

    Yang, Zhou; Yi, Fahuai; Dai, Min

    A strike reset option is an option that allows its holder to reset the strike price to the prevailing underlying asset price at a moment chosen by the holder. The pricing model of the option can be formulated as a one-dimensional parabolic variational inequality, or equivalently, a free boundary problem, where the free boundary just corresponds to the optimal reset strategy adopted by the holder of the option. This paper is concerned with the theoretical analysis of the model. The existence and uniqueness of the solution are established. Furthermore, we study properties of the free boundary. The monotonicity and C smoothness of the free boundary are proven in some situations.

  1. Stochastic control and real options valuation of thermal storage-enabled demand response from flexible district energy systems

    OpenAIRE

    Kitapbayev, Yerkin; Moriarty, John; Mancarella, Pierluigi

    2014-01-01

    In district energy systems powered by Combined Heat and Power (CHP) plants, thermal storage can significantly increase CHP flexibility to respond to real time market signals and therefore improve the business case of such demand response schemes in a Smart Grid environment. However, main challenges remain as to what is the optimal way to control inter-temporal storage operation in the presence of uncertain market prices, and then how to value the investment into storage as flexibility enabler...

  2. “Let’s Wait and See!” – The Real Option to Switch as a New Element of Customer Value

    NARCIS (Netherlands)

    Henseler, Jörg; Roemer, Ellen

    2013-01-01

    We suggest that a customer’s option to switch suppliers, and to wait and see before switching, adds to customer value in uncertain markets, and affects the customer’s switching behavior. We use a real options model to examine the value of this option and conduct sensitivity analyses based on data

  3. The valuative tree

    CERN Document Server

    Favre, Charles

    2004-01-01

    This volume is devoted to a beautiful object, called the valuative tree and designed as a powerful tool for the study of singularities in two complex dimensions. Its intricate yet manageable structure can be analyzed by both algebraic and geometric means. Many types of singularities, including those of curves, ideals, and plurisubharmonic functions, can be encoded in terms of positive measures on the valuative tree. The construction of these measures uses a natural tree Laplace operator of independent interest.

  4. Option Pricing under Risk-Minimization Criterion in an Incomplete Market with the Finite Difference Method

    Directory of Open Access Journals (Sweden)

    Xinfeng Ruan

    2013-01-01

    Full Text Available We study option pricing with risk-minimization criterion in an incomplete market where the dynamics of the risky underlying asset is governed by a jump diffusion equation with stochastic volatility. We obtain the Radon-Nikodym derivative for the minimal martingale measure and a partial integro-differential equation (PIDE of European option. The finite difference method is employed to compute the European option valuation of PIDE.

  5. Market-consistent actuarial valuation

    CERN Document Server

    Wüthrich, Mario V

    2016-01-01

    This is the third edition of this well-received textbook, presenting powerful methods for measuring insurance liabilities and assets in a consistent way, with detailed mathematical frameworks that lead to market-consistent values for liabilities. Topics covered are stochastic discounting with deflators, valuation portfolio in life and non-life insurance, probability distortions, asset and liability management, financial risks, insurance technical risks, and solvency. Including updates on recent developments and regulatory changes under Solvency II, this new edition of Market-Consistent Actuarial Valuation also elaborates on different risk measures, providing a revised definition of solvency based on industry practice, and presents an adapted valuation framework which takes a dynamic view of non-life insurance reserving risk.

  6. A highly efficient Shannon wavelet inverse Fourier technique for pricing European options

    NARCIS (Netherlands)

    L. Ortiz Gracia (Luis); C.W. Oosterlee (Cornelis)

    2016-01-01

    htmlabstractIn the search for robust, accurate, and highly efficient financial option valuation techniques, we here present the SWIFT method (Shannon wavelets inverse Fourier technique), based on Shannon wavelets. SWIFT comes with control over approximation errors made by means of

  7. Dynamic Jump Intensities and Risk Premiums in Crude Oil Futures and Options Markets

    DEFF Research Database (Denmark)

    Christoffersen, Peter; Jacobs, Kris; Li, Bingxin

    2016-01-01

    Options on crude oil futures are the most actively traded commodity options. We develop a class of computationally efficient discrete-time jump models that allow for closed-form option valuation, and we use crude oil futures and options data to investigate the economic importance of jumps...... and dynamic jump intensities in these markets. Allowing for jumps is crucial for modeling crude oil futures and futures options, and we find evidence in favor of time-varying jump intensities. During crisis periods, jumps occur more frequently. The properties of the jump processes implied by the option data...... differ from those implied by the futures data, which may be due to improved parameter identification....

  8. THEORETICAL ASPECTS REGARDING THE VALUATION OF INTANGIBLE ASSETS

    Directory of Open Access Journals (Sweden)

    HOLT GHEORGHE

    2015-03-01

    Full Text Available Valuation of intangible assets represents one of the most delicate problems of assessing a company. Usually, valuation of intangible assets is in the process of evaluating enterprise as a whole. Therefore, Intangible Asset Valuers must have detailed knowledge on business valuation, in particular, the income-based valuation methods (capitalization / updating net cash flow. Valuation of Intangible Assets is the objective of the International Valuation Standards (GN 4 Valuation of Intangible Assets (revised 2010. Next to it was recently proposed GN 16 Valuation of Intangible Assets for IFRS reporting. International Accounting Standard (IAS 38 Intangible Assets prescribe the accounting treatment for intangible assets, analyze the criteria that an intangible asset must meet to be recognized, specific carrying amount of intangible assets and sets out requirements for disclosure of intangible assets. From an accounting perspective, relevant professional accounting standards and the following: IFRS 3 Business Combinations, IAS 36 Impairment of Assets and SFAS 157 fair value measurement, developed by the FASB. There is a more pronounced near the provisions of IAS 38 contained in GN 4. Therefore, a good professional intangible asset valuation must know thoroughly the conditions, principles, criteria and assessment methods recognized by those standards

  9. Implicit Valuation of the Near-Miss is Dependent on Outcome Context.

    Science.gov (United States)

    Banks, Parker J; Tata, Matthew S; Bennett, Patrick J; Sekuler, Allison B; Gruber, Aaron J

    2018-03-01

    Gambling studies have described a "near-miss effect" wherein the experience of almost winning increases gambling persistence. The near-miss has been proposed to inflate the value of preceding actions through its perceptual similarity to wins. We demonstrate here, however, that it acts as a conditioned stimulus to positively or negatively influence valuation, dependent on reward expectation and cognitive engagement. When subjects are asked to choose between two simulated slot machines, near-misses increase valuation of machines with a low payout rate, whereas they decrease valuation of high payout machines. This contextual effect impairs decisions and persists regardless of manipulations to outcome feedback or financial incentive provided for good performance. It is consistent with proposals that near-misses cause frustration when wins are expected, and we propose that it increases choice stochasticity and overrides avoidance of low-valued options. Intriguingly, the near-miss effect disappears when subjects are required to explicitly value machines by placing bets, rather than choosing between them. We propose that this task increases cognitive engagement and recruits participation of brain regions involved in cognitive processing, causing inhibition of otherwise dominant systems of decision-making. Our results reveal that only implicit, rather than explicit strategies of decision-making are affected by near-misses, and that the brain can fluidly shift between these strategies according to task demands.

  10. The RealGas and RealGasH2O Options of the TOUGH+ Code for the Simulation of Coupled Fluid and Heat Flow in Tight/Shale Gas Systems

    Energy Technology Data Exchange (ETDEWEB)

    Moridis, George; Freeman, Craig

    2013-09-30

    We developed two new EOS additions to the TOUGH+ family of codes, the RealGasH2O and RealGas . The RealGasH2O EOS option describes the non-isothermal two-phase flow of water and a real gas mixture in gas reservoirs, with a particular focus in ultra-tight (such as tight-sand and shale gas) reservoirs. The gas mixture is treated as either a single-pseudo-component having a fixed composition, or as a multicomponent system composed of up to 9 individual real gases. The RealGas option has the same general capabilities, but does not include water, thus describing a single-phase, dry-gas system. In addition to the standard capabilities of all members of the TOUGH+ family of codes (fully-implicit, compositional simulators using both structured and unstructured grids), the capabilities of the two codes include: coupled flow and thermal effects in porous and/or fractured media, real gas behavior, inertial (Klinkenberg) effects, full micro-flow treatment, Darcy and non-Darcy flow through the matrix and fractures of fractured media, single- and multi-component gas sorption onto the grains of the porous media following several isotherm options, discrete and fracture representation, complex matrix-fracture relationships, and porosity-permeability dependence on pressure changes. The two options allow the study of flow and transport of fluids and heat over a wide range of time frames and spatial scales not only in gas reservoirs, but also in problems of geologic storage of greenhouse gas mixtures, and of geothermal reservoirs with multi-component condensable (H2O and CH4) and non-condensable gas mixtures. The codes are verified against available analytical and semi-analytical solutions. Their capabilities are demonstrated in a series of problems of increasing complexity, ranging from isothermal flow in simpler 1D and 2D conventional gas reservoirs, to non-isothermal gas flow in 3D fractured shale gas reservoirs involving 4 types of fractures, micro-flow, non-Darcy flow and gas

  11. The value of product flexibility in nuclear hydrogen technologies: A real options analysis

    International Nuclear Information System (INIS)

    Botterud, Audun; Yildiz, Bilge; Conzelmann, Guenter; Petri, Mark C.

    2009-01-01

    Previous economic studies of nuclear hydrogen technologies focused on levelized costs without accounting for risks and uncertainties faced by potential investors. To address some of these risks and uncertainties, we used real options theory to assess the profitability of three nuclear hydrogen production technologies in evolving electricity and hydrogen markets. Monte-Carlo simulations are used to represent the uncertainty in hydrogen and electricity prices. The model computes both the expected value and the distribution of discounted profits from the production plant. It also quantifies the value of the option to switch between hydrogen and electricity production. Under these assumptions, we conclude that investors will find significant value in the capability to switch plant output between electricity and hydrogen. (author)

  12. Cost approach of health care entity intangible asset valuation.

    Science.gov (United States)

    Reilly, Robert F

    2012-01-01

    In the valuation synthesis and conclusion process, the analyst should consider the following question: Does the selected valuation approach(es) and method(s) accomplish the analyst's assignment? Also, does the selected valuation approach and method actually quantify the desired objective of the intangible asset analysis? The analyst should also consider if the selected valuation approach and method analyzes the appropriate bundle of legal rights. The analyst should consider if there were sufficient empirical data available to perform the selected valuation approach and method. The valuation synthesis should consider if there were sufficient data available to make the analyst comfortable with the value conclusion. The valuation analyst should consider if the selected approach and method will be understandable to the intended audience. In the valuation synthesis and conclusion, the analyst should also consider which approaches and methods deserve the greatest consideration with respect to the intangible asset's RUL. The intangible asset RUL is a consideration of each valuation approach. In the income approach, the RUL may affect the projection period for the intangible asset income subject to either yield capitalization or direct capitalization. In the cost approach, the RUL may affect the total amount of obsolescence, if any, from the estimate cost measure (that is, the intangible reproduction cost new or replacement cost new). In the market approach, the RUL may effect the selection, rejection, and/or adjustment of the comparable or guideline intangible asset sale and license transactional data. The experienced valuation analyst will use professional judgment to weight the various value indications to conclude a final intangible asset value, based on: The analyst's confidence in the quantity and quality of available data; The analyst's level of due diligence performed on that data; The relevance of the valuation method to the intangible asset life cycle stage and

  13. Nuclear Fuel Cycle Evaluation and Real Options

    Directory of Open Access Journals (Sweden)

    L. Havlíček

    2008-01-01

    Full Text Available The first part of this paper describes the nuclear fuel cycle. It is divided into three parts. The first part, called Front-End, covers all activities connected with fuel procurement and fabrication. The middle part of the cycle includes fuel reload design activities and the operation of the fuel in the reactor. Back-End comprises all activities ensuring safe separation of spent fuel and radioactive waste from the environment. The individual stages of the fuel cycle are strongly interrelated. Overall economic optimization is very difficult. Generally, NPV is used for an economic evaluation in the nuclear fuel cycle. However the high volatility of uranium prices in the Front-End, and the large uncertainty of both economic and technical parameters in the Back-End, make the use of NPV difficult. The real option method is able to evaluate the value added by flexibility of decision making by a company under conditions of uncertainty. The possibility of applying this method to the nuclear fuel cycle evaluation is studied. 

  14. Project valuation and investment decisions: CAPM versus arbitrage

    OpenAIRE

    Magni, Carlo Alberto

    2007-01-01

    This paper shows that (i) project valuation via disequilibrium NPV+CAPM contradicts valuation via arbitrage pricing, (ii) standard CAPM-minded decision makers may fail to profit from arbitrage opportunities, (iii) standard CAPM-based valuation violates value additivity. As a consequence, the standard use of CAPM for project valuation and decision making should be reconsidered.

  15. A Highly Efficient Shannon Wavelet Inverse Fourier Technique for Pricing European Options

    NARCIS (Netherlands)

    Ortiz-Gracia, Luis; Oosterlee, C.W.

    2016-01-01

    In the search for robust, accurate, and highly efficient financial option valuation techniques, we here present the SWIFT method (Shannon wavelets inverse Fourier technique), based on Shannon wavelets. SWIFT comes with control over approximation errors made by means of sharp quantitative error

  16. Valuation of nature in conservation and restoration

    NARCIS (Netherlands)

    Swart, JAA; van der Windt, HJ; Keulartz, J

    Valuation of nature is an important aspect of nature conservation and restoration. Understanding valuation in a broad sense may contribute to conservation strategies since it may lead to better support from society. In this article we propose a model of valuation with respect to conservation and

  17. Valuation of Nature in Conservation and Restoration

    NARCIS (Netherlands)

    Keulartz, F.W.J.; Swart, S.; Windt, v.d. H.

    2001-01-01

    Valuation of nature is an important aspect of nature conservation and restoration. Understanding valuation in a broad sense may contribute to conservation strategies since it may lead to better support from society. In this article we propose a model of valuation with respect to conservation and

  18. Prime divisors and noncommutative valuation theory

    CERN Document Server

    Marubayashi, Hidetoshi

    2012-01-01

    Classical valuation theory has applications in number theory and class field theory as well as in algebraic geometry, e.g. in a divisor theory for curves.  But the noncommutative equivalent is mainly applied to finite dimensional skewfields.  Recently however, new types of algebras have become popular in modern algebra; Weyl algebras, deformed and quantized algebras, quantum groups and Hopf algebras, etc. The advantage of valuation theory in the commutative case is that it allows effective calculations, bringing the arithmetical properties of the ground field into the picture.  This arithmetical nature is also present in the theory of maximal orders in central simple algebras.  Firstly, we aim at uniting maximal orders, valuation rings, Dubrovin valuations, etc. in a common theory, the theory of primes of algebras.  Secondly, we establish possible applications of the noncommutative arithmetics to interesting classes of algebras, including the extension of central valuations to nice classes of quantized a...

  19. Institutionalizing environmental valuation into policy

    NARCIS (Netherlands)

    Phelps, Jacob; Dermawan, Ahmad; Garmendia, Eneko

    2017-01-01

    Monetary valuation of the environment is increasingly embedded in policy. Despite broad claims that valuation is policy-relevant, there is widespread frustration that it has not widely improved environmental outcomes, that it obscures many other types of values, and presents unintended consequences.

  20. The real deal: Willingness-to-pay and satiety expectations are greater for real foods versus their images.

    Science.gov (United States)

    Romero, Carissa A; Compton, Michael T; Yang, Yueran; Snow, Jacqueline C

    2017-11-23

    Laboratory studies of human dietary choice have relied on computerized two-dimensional (2D) images as stimuli, whereas in everyday life, consumers make decisions in the context of real foods that have actual caloric content and afford grasping and consumption. Surprisingly, few studies have compared whether real foods are valued more than 2D images of foods, and in the studies that have, differences in the stimuli and testing conditions could have resulted in inflated bids for the real foods. Moreover, although the caloric content of food images has been shown to influence valuation, no studies to date have investigated whether 'real food exposure effects' on valuation reflect greater sensitivity to the caloric content of real foods versus images. Here, we compared willingness-to-pay (WTP) for, and expectations about satiety after consuming, everyday snack foods that were displayed as real foods versus 2D images. Critically, our 2D images were matched closely to the real foods for size, background, illumination, and apparent distance, and trial presentation and stimulus timing were identical across conditions. We used linear mixed effects modeling to determine whether effects of display format were modulated by food preference and the caloric content of the foods. Compared to food images, observers were willing to pay 6.62% more for (Experiment 1) and believed that they would feel more satiated after consuming (Experiment 2), foods displayed as real objects. Moreover, these effects appeared to be consistent across food preference, caloric content, as well as observers' estimates of the caloric content of the foods. Together, our results confirm that consumers' perception and valuation of everyday foods is influenced by the format in which they are displayed. Our findings raise important new insights into the factors that shape dietary choice in real-world contexts and highlight potential avenues for improving public health approaches to diet and obesity. Copyright

  1. EVALUATION OF LAND BASED ON MARKET PRICE OBJECTS OF REAL ESTATE IN UKRAINE: PROBLEMS AND WAYS OF THEIR SOLUTIONS

    Directory of Open Access Journals (Sweden)

    MARTYN А. G.

    2017-03-01

    Full Text Available Summary. Raising of problem. During the reform of land and property relations, has been carried out in Ukraine since the early 1990s, land plots and buildings received the status of goods, participate in economic turnover, have value and price. At the same time, not the most important prerequisite for the introduction in Ukraine of a mass valuation of real estate, which is intended to become a base for the fair taxation of land plots and other real estate, should be the systematic collection of mass data on the market prices of real estate. Constant changes, additions and improvements to the current normative monetary assessment of land do not give a real change in the methodology of assessment because it is based on regulatory indicators, there is a non-market based assessment. This approach does not give positive results and in the overwhelming majority we distort the evaluation indicators. As a result, there is a situation where in some places the price of a square meter is much lower than the market (real price, while in others it is much higher than the actual price. Thus, the transition to the use of monetary land valuation, which is based on mass market indicators (mass valuation, will get rid of the regulatory indicators by introducing a market valuation base. Purpose. Conduct an analysis of the current state of monetary valuation of land in Ukraine, form the main problems of the modern land assessment area and guide the ways to improve and transition to market valuation of land based on widespread use of mass data on market prices of real estate. Conclusion. The analysis of the current state of the monetary valuation of land shows a significant deviation of the evaluation results with real market prices, indicating the imperfection of the existing method of normative monetary evaluation. Mass evaluation in the short term can solve the problems with the reliability of the estimates and improve the system of land taxation.

  2. 12 CFR 950.10 - Collateral valuation; appraisals.

    Science.gov (United States)

    2010-01-01

    ... 12 Banks and Banking 7 2010-01-01 2010-01-01 false Collateral valuation; appraisals. 950.10...-BALANCE SHEET ITEMS ADVANCES Advances to Members § 950.10 Collateral valuation; appraisals. (a) Collateral valuation. Each Bank shall determine the value of collateral securing the Bank's advances in accordance with...

  3. 26 CFR 20.2032-1 - Alternate valuation.

    Science.gov (United States)

    2010-04-01

    ... alternate valuation method under section 2032, the property included in the decedent's gross estate on the..., the alternate valuation method applies to all property included in the gross estate and cannot be... elects the alternate valuation method under section 2432, all property interests existing at the date of...

  4. Understanding the advantages of open innovation practices in corporate venturing in terms of real options

    NARCIS (Netherlands)

    Vanhaverbeke, W.P.M.; Vrande, van de V.J.A.; Chesbrough, H.

    2008-01-01

    Part of the advantages of using open innovation (compared to closed innovation) in corporate venturing can be explained by applying the real options approach. Open innovation in risk-laden activities such as corporate venturing has the following advantages: (i) benefits from early involvement in new

  5. Évaluation institutionnelle : Cadre pour le renforcement des ...

    International Development Research Centre (IDRC) Digital Library (Canada)

    Les applications possibles vont de l'auto-évaluation interne à l'auto-évaluation externe par un organisme de financement et de l'évaluation exhaustive du fonctionnement d'une institution au relevé d'impressions-clés à l'occasion de visites brèves. Évaluation institutionnelle s'adresse notamment à une institution récente ou ...

  6. Reasons to value the health care intangible asset valuation.

    Science.gov (United States)

    Reilly, Robert F

    2012-01-01

    There are numerous individual reasons to conduct a health care intangible asset valuation. This discussion summarized many of these reasons and considered the common categories of these individual reasons. Understanding the reason for the intangible asset analysis is an important prerequisite to conducting the valuation, both for the analyst and the health care owner/operator. This is because an intangible asset valuation may not be the type of analysis that the owner/operator really needs. Rather, the owner/operator may really need an economic damages measurement, a license royalty rate analysis, an intercompany transfer price study, a commercialization potential evaluation, or some other type of intangible asset analysis. In addition, a clear definition of the reason for the valuation will allow the analyst to understand if (1) any specific analytical guidelines, procedures, or regulations apply and (2) any specific reporting requirement applies. For example, intangible asset valuations prepared for fair value accounting purposes should meet specific ASC 820 fair value accounting guidance. Intangible asset valuations performed for intercompany transfer price tax purposes should comply with the guidance provided in the Section 482 regulations. Likewise, intangible asset valuations prepared for Section 170 charitable contribution purposes should comply with specific reporting requirements. The individual reasons for the health care intangible asset valuation may influence the standard of value applied, the valuation date selected, the valuation approaches and methods applied, the form and format of valuation report prepared, and even the type of professional employed to perform the valuation.

  7. 26 CFR 26.2642-2 - Valuation.

    Science.gov (United States)

    2010-04-01

    ... reflects net appreciation and depreciation (occurring between the valuation date and the date of... on a basis that fairly reflects net appreciation and depreciation (occurring between the valuation...

  8. 32 CFR 644.168 - Exercise of options.

    Science.gov (United States)

    2010-07-01

    ... 32 National Defense 4 2010-07-01 2010-07-01 true Exercise of options. 644.168 Section 644.168... ESTATE HANDBOOK Acquisition Procurement of Options Prior to Real Estate Directives (military) § 644.168 Exercise of options. Upon issuance of a real estate directive for acquisition of the optioned real property...

  9. Valuation Studies 4(1) 2016

    DEFF Research Database (Denmark)

    2016-01-01

    This issue of Valuation Studies presents an anthropological take on 'alternative valuations'. The three articles in this issue stem from a workshop held in August 2012 at James Cook University in Cairns, Australia. The workshop was organized by the guest editors of this issue along with Bruce...

  10. Pricing Exotic Options under a High-Order Markovian Regime Switching Model

    Directory of Open Access Journals (Sweden)

    Wai-Ki Ching

    2007-10-01

    Full Text Available We consider the pricing of exotic options when the price dynamics of the underlying risky asset are governed by a discrete-time Markovian regime-switching process driven by an observable, high-order Markov model (HOMM. We assume that the market interest rate, the drift, and the volatility of the underlying risky asset's return switch over time according to the states of the HOMM, which are interpreted as the states of an economy. We will then employ the well-known tool in actuarial science, namely, the Esscher transform to determine an equivalent martingale measure for option valuation. Moreover, we will also investigate the impact of the high-order effect of the states of the economy on the prices of some path-dependent exotic options, such as Asian options, lookback options, and barrier options.

  11. An Initial Design of ISO 19152:2012 LADM Based Valuation and Taxation Data Model

    Science.gov (United States)

    Çağdaş, V.; Kara, A.; van Oosterom, P.; Lemmen, C.; Işıkdağ, Ü.; Kathmann, R.; Stubkjær, E.

    2016-10-01

    A fiscal registry or database is supposed to record geometric, legal, physical, economic, and environmental characteristics in relation to property units, which are subject to immovable property valuation and taxation. Apart from procedural standards, there is no internationally accepted data standard that defines the semantics of fiscal databases. The ISO 19152:2012 Land Administration Domain Model (LADM), as an international land administration standard focuses on legal requirements, but considers out of scope specifications of external information systems including valuation and taxation databases. However, it provides a formalism which allows for an extension that responds to the fiscal requirements. This paper introduces an initial version of a LADM - Fiscal Extension Module for the specification of databases used in immovable property valuation and taxation. The extension module is designed to facilitate all stages of immovable property taxation, namely the identification of properties and taxpayers, assessment of properties through single or mass appraisal procedures, automatic generation of sales statistics, and the management of tax collection, dealing with arrears and appeals. It is expected that the initial version will be refined through further activities held by a possible joint working group under FIG Commission 7 (Cadastre and Land Management) and FIG Commission 9 (Valuation and the Management of Real Estate) in collaboration with other relevant international bodies.

  12. Assessment of Predictor Importance with the Example of the Real Estate Market

    Directory of Open Access Journals (Sweden)

    Kubus Mariusz

    2016-12-01

    Full Text Available Regression methods can be used for the valuation of real estate in the comparative approach. However, one of the problems of predictive modelling is the presence of redundant or irrelevant variables in data. Such variables can decrease the stability of models, and they can even reduce prediction accuracy. The choice of real estate’s features is largely determined by an appraiser, who is guided by his/her experience. Still, the use of statistical methods of a feature selection can lead to a more accurate valuation model. In the paper we apply regularized linear regression which belongs to embedded methods of a feature selection. For the considered data set of real estate land designated for single-family housing we obtained a model, which led to a more accurate valuation than some other popular linear models applied with or without a feature selection. To assess the model’s quality we used the leave-one-out cross-validation.

  13. Multifactor valuation models of energy futures and options on futures

    Science.gov (United States)

    Bertus, Mark J.

    The intent of this dissertation is to investigate continuous time pricing models for commodity derivative contracts that consider mean reversion. The motivation for pricing commodity futures and option on futures contracts leads to improved practical risk management techniques in markets where uncertainty is increasing. In the dissertation closed-form solutions to mean reverting one-factor, two-factor, three-factor Brownian motions are developed for futures contracts. These solutions are obtained through risk neutral pricing methods that yield tractable expressions for futures prices, which are linear in the state variables, hence making them attractive for estimation. These functions, however, are expressed in terms of latent variables (i.e. spot prices, convenience yield) which complicate the estimation of the futures pricing equation. To address this complication a discussion on Dynamic factor analysis is given. This procedure documents latent variables using a Kalman filter and illustrations show how this technique may be used for the analysis. In addition, to the futures contracts closed form solutions for two option models are obtained. Solutions to the one- and two-factor models are tailored solutions of the Black-Scholes pricing model. Furthermore, since these contracts are written on the futures contracts, they too are influenced by the same underlying parameters of the state variables used to price the futures contracts. To conclude, the analysis finishes with an investigation of commodity futures options that incorporate random discrete jumps.

  14. A highly efficient pricing method for European-style options based on Shannon wavelets

    NARCIS (Netherlands)

    L. Ortiz Gracia (Luis); C.W. Oosterlee (Cornelis)

    2017-01-01

    textabstractIn the search for robust, accurate and highly efficient financial option valuation techniques, we present here the SWIFT method (Shannon Wavelets Inverse Fourier Technique), based on Shannon wavelets. SWIFT comes with control over approximation errors made by means of sharp quantitative

  15. What is the best way to enter Florida's real estate market in today's economy? : This may serve as a simple guide which offers options for a startup real estate company to enter any real estate market

    OpenAIRE

    Bryan, Paul

    2011-01-01

    P&I International real estate (PIIRE for short) is a real estate company which left the Florida real estate market in 2006. PIIRE is now seeking the best method to re-enter the Florida’s real estate market within the near future. The owners are seeking the best method to re-establish their real estate business in Florida. At this point the location in Florida has not yet been determined. The determining factors include financing options, business type entry mode, and governmental issues. ...

  16. Option Valuation with Volatility Components, Fat Tails, and Non-Monotonic Pricing Kernels

    DEFF Research Database (Denmark)

    Babaoglu, Kadir; Christoffersen, Peter; Heston, Steven L.

    We nest multiple volatility components, fat tails and a U-shaped pricing kernel in a single option model and compare their contribution to describing returns and option data. All three features lead to statistically significant model improvements. A U-shaped pricing kernel is economically most im...

  17. A viable real estate economy with disruption and blockchain

    NARCIS (Netherlands)

    Veuger, Jan

    2017-01-01

    Two titles in one cover. On page 56-112 there's the English version of the book: 'A viable real estate economy with disruption and blockchain. Does real estate still have the value that it had, or is the valuation of real estate going to change due to surprising products and services, innovative

  18. Method of Banks Valuation

    OpenAIRE

    Eva Horvátová

    2010-01-01

    Since there is not a special common framework for valuation banks and it gives possibilities to create establishment, improvement and adaptation of various approaches to measuring the value of banks and financial institutions. Most approaches banks valuation note the strong dependence of financial institutions value from market interest rates (Mishkin, F., Miller, WD, Copeland, T., Koller, T., Damodaran, A., and others). Each approache reflects greater or lesser degree of accuracy depending o...

  19. Comparing 15D Valuation Studies in Norway and Finland-Challenges When Combining Information from Several Valuation Tasks.

    Science.gov (United States)

    Michel, Yvonne Anne; Augestad, Liv Ariane; Rand, Kim

    2018-04-01

    The 15D is a generic preference-based health-related quality-of-life instrument developed in Finland. Values for the 15D instrument are estimated by combining responses to three distinct valuation tasks. The impact of how these tasks are combined is relatively unexplored. To compare 15D valuation studies conducted in Norway and Finland in terms of scores assigned in the valuation tasks and resulting value algorithms, and to discuss the contributions of each task and the algorithm estimation procedure to observed differences. Norwegian and Finnish scores from the three valuation tasks were compared using independent samples t tests and Lin concordance correlation coefficients. Covariance between tasks was assessed using Pearson product-moment correlations. Norwegian and Finnish value algorithms were compared using concordance correlation coefficients, total ranges, and ranges for individual dimensions. Observed differences were assessed using minimal important difference. Mean scores in the main valuation task were strikingly similar between the two countries, whereas the final value algorithms were less similar. The largest differences between Norway and Finland were observed for depression, vision, and mental function. 15D algorithms are a product of combining scores from three valuation tasks by use of methods involving multiplication. This procedure used to combine scores from the three tasks by multiplication serves to amplify variance from each task. From relatively similar responses in Norway and Finland, diverging value algorithms are created. We propose to simplify the 15D algorithm estimation procedure by using only one of the valuation tasks. Copyright © 2018 International Society for Pharmacoeconomics and Outcomes Research (ISPOR). Published by Elsevier Inc. All rights reserved.

  20. Real options valuation in the design of Future surface combatants

    Science.gov (United States)

    2017-06-01

    design, different from the preceding FREMM multi-mission frigates, and features an unusual ‘ inverted bow’ intended to improve seakeeping in high sea...method of ship design is becoming cost-prohibitive when looking at the lifetime life-cycle cost for upgrades, overhauls, and drives inflexibility

  1. Decision-making model of generation technology under uncertainty based on real option theory

    International Nuclear Information System (INIS)

    Ming, Zeng; Ping, Zhang; Shunkun, Yu; Ge, Zhang

    2016-01-01

    Highlights: • A decision-making model of generation technology investment is proposed. • The irreversible investment concept and real option theory is introduced. • Practical data was used to prove the validity of the model. • Impact of electricity and fuel price fluctuation on investment was analyzed. - Abstract: The introduction of market competition and the increased uncertainty factors makes the generators have to decide not only on whether to invest generation capacity or not but also on what kind of generation technology to choose. In this paper, a decision-making model of generation technology investment is proposed. The irreversible investment concept and real option theory is introduced as the fundamental of the model. In order to explain the decision-making process of generator’s investment, the decision-making optimization model was built considering two generation technologies, i.e., the heat-only system and the combined heat and power generation. Also, we discussed the theory deducing process, which explained how to eliminate the overrated economic potential caused by risk hazard, based on economic evaluation of both generation technologies. Finally, practical data from electricity market of Inner Mongolia was used to prove the validity of the model and the impact of uncertainties of electricity and fuel price fluctuation on investment was analyzed according to the simulated results.

  2. Financial options methodology for analyzing investments in new technology

    Energy Technology Data Exchange (ETDEWEB)

    Wenning, B.D. [Texas Utilities Services, Inc., Dallas, TX (United States)

    1994-12-31

    The evaluation of investments in longer term research and development in emerging technologies, because of the nature of such subjects, must address inherent uncertainties. Most notably, future cash flow forecasts include substantial uncertainties. Conventional present value methodology, when applied to emerging technologies severely penalizes cash flow forecasts, and strategic investment opportunities are at risk of being neglected. Use of options valuation methodology adapted from the financial arena has been introduced as having applicability in such technology evaluations. Indeed, characteristics of superconducting magnetic energy storage technology suggest that it is a candidate for the use of options methodology when investment decisions are being contemplated.

  3. Financial options methodology for analyzing investments in new technology

    International Nuclear Information System (INIS)

    Wenning, B.D.

    1994-01-01

    The evaluation of investments in longer term research and development in emerging technologies, because of the nature of such subjects, must address inherent uncertainties. Most notably, future cash flow forecasts include substantial uncertainties. Conventional present value methodology, when applied to emerging technologies severely penalizes cash flow forecasts, and strategic investment opportunities are at risk of being neglected. Use of options valuation methodology adapted from the financial arena has been introduced as having applicability in such technology evaluations. Indeed, characteristics of superconducting magnetic energy storage technology suggest that it is a candidate for the use of options methodology when investment decisions are being contemplated

  4. Valuation of physical transmission rights—An analysis of electricity cross-border capacities between Germany and the Netherlands

    International Nuclear Information System (INIS)

    Wobben, Magnus; Dieckmann, Birgit; Reichmann, Oleg

    2012-01-01

    The purpose of this paper is to discuss market-coherent valuation of physical transmission rights for cross-border capacities between Germany and the Netherlands. Aiming at a fair valuation of these contracts, the most important stylized facts of electricity prices such as mean reversion, spikes and correlations of regional prices have to be considered. We present different approaches to the valuation of physical transmission rights and perform a quantitative analysis of the results. On the one hand various challenges of modeling regional price spreads are analyzed. On the other hand we indicate a structural undervaluation of physical transmission rights in all model constellations, i.e. market prices are below theoretical prices of PTR's flexibility. We discuss several reasons for this undervaluation and finally state that regulatory modifications have to be made to avoid missing incentives for the extension of cross-border capacities. - Highlights: ► Modeling transmission rights as option contracts. ► Analysis of regional price spreads. ► Indication of a structural undervaluation of physical transmission rights.

  5. Trust in a viable real estate economy with disruption and blockchain

    NARCIS (Netherlands)

    Veuger, Jan

    Does real estate still have the value that it once had, or will the valuation of real estate change due to surprising products and services, innovative business models, different market strategies, innovative ways of organizing and managing in the (real estate) markets? Innovation revolves around

  6. 26 CFR 20.7520-2 - Valuation of charitable interests.

    Science.gov (United States)

    2010-04-01

    ... 26 Internal Revenue 14 2010-04-01 2010-04-01 false Valuation of charitable interests. 20.7520-2... Valuations § 20.7520-2 Valuation of charitable interests. (a) In general—(1) Valuation. Except as otherwise... such interests determined under § 20.7520-1. (2) Prior-month election rule. If any part of the property...

  7. 26 CFR 20.2031-9 - Valuation of other property.

    Science.gov (United States)

    2010-04-01

    ... 26 Internal Revenue 14 2010-04-01 2010-04-01 false Valuation of other property. 20.2031-9 Section... Valuation of other property. The valuation of any property not specifically described in §§ 20.2031-2 to 20... future interest in property not subject to valuation in accordance with the actuarial principles set...

  8. Defaultable Game Options in a Hazard Process Model

    Directory of Open Access Journals (Sweden)

    Tomasz R. Bielecki

    2009-01-01

    Full Text Available The valuation and hedging of defaultable game options is studied in a hazard process model of credit risk. A convenient pricing formula with respect to a reference filteration is derived. A connection of arbitrage prices with a suitable notion of hedging is obtained. The main result shows that the arbitrage prices are the minimal superhedging prices with sigma martingale cost under a risk neutral measure.

  9. The value of informal care in the context of option B+ in Malawi: a contingent valuation approach.

    Science.gov (United States)

    Chiwaula, Levison Stanely; Chirwa, Gowokani Chijere; Cataldo, Fabian; Kapito-Tembo, Atupele; Hosseinipour, Mina C; van Lettow, Monique; Tweya, Hannock; Kayoyo, Virginia; Khangamwa-Kaunda, Blessings; Kasende, Florence; Trapence, Clement; Gugsa, Salem; Rosenberg, Nora E; Eliya, Michael; Phiri, Sam

    2016-04-19

    Informal care, the health care provided by the patient's social network is important in low income settings although its monetary value is rarely estimated. The lack of estimates of the value of informal care has led to its omission in economic evaluations but this can result in incorrect decisions about cost effectiveness of an intervention. We explore the use of contingent valuation methods of willingness to pay (WTP) and willingness to accept (WTA) to estimate the value of informal care provided to HIV infected women that are accessing antiretroviral therapy (ART) under the Option B+ approach to prevention of mother-to-child transmission (PMTCT) of HIV in Malawi. We collected cross sectional data from 93 caregivers of women that received ART care from six health facilities in Malawi. Caregivers of women that reported for ART care on the survey day and consented to participate in the survey were included until the targeted sample size for the facility was reached. We estimated the value of informal care by using the willingness to accept (WTA) and willingness to pay (WTP) approaches. Medians were used to summarize the values and these were compared by the Wilcoxon signed-rank test. The median WTA to provide informal care in a month was US$30 and the median WTP for informal care was US$13 and the two were statistically different (p lower quintile (US$15 vs. US$13, p < 0.0462). Informal caregivers place substantial value on informal care giving. In low income settings where most caregivers are not formally employed, WTP and WTA approaches can be used to value informal care. NCT02005835.

  10. 複合オプション会計と企業価値評価

    OpenAIRE

    上野, 清貴

    2006-01-01

    The purpose of this paper is to explain the compound option accounting and the rainbow option accounting, and discuss the corporate valuation function of real option accounting. The simultaneous compound option accounting and the sequential compound option accounting are discussed on the compound option accounting. The rainbow option accounting is explained using the quadranomial approach. The rainbow option accounting with independent uncertainties and the rainbow option accounting with corr...

  11. 10 myths of healthcare business valuation.

    Science.gov (United States)

    Robeson, J David; Kaplan, Karin Chernoff

    2008-10-01

    *Acceptance of common myths regarding business valuations can undermine a hospital's efforts to successfully negotiate deals with physicians. *Hospitals need to clearly understand the nature of fair market value (FMV), the use of multiples, the "guideline company technique," whether the FMV can be based on acute care revenue stream, the physician compensation model used in the valuation, and the applicability of the physician's historical production level. *Other matters that warrant careful consideration include whether to tax effect, whether to pay for goodwill, and whether obsolescence can be accounted for in the valuation.

  12. 78 FR 7215 - Disclosure and Delivery Requirements for Copies of Appraisals and Other Written Valuations Under...

    Science.gov (United States)

    2013-01-31

    ... on the basis of sex, race, color, religion, national origin, marital status, or age (provided the... educate and inform consumers about appraisals and other valuations and their role in the real estate... liability theory, which could reduce access to credit by reducing investor demand. Other industry commenters...

  13. Demand Response Valuation Frameworks Paper

    Energy Technology Data Exchange (ETDEWEB)

    Heffner, Grayson

    2009-02-01

    While there is general agreement that demand response (DR) is a valued component in a utility resource plan, there is a lack of consensus regarding how to value DR. Establishing the value of DR is a prerequisite to determining how much and what types of DR should be implemented, to which customers DR should be targeted, and a key determinant that drives the development of economically viable DR consumer technology. Most approaches for quantifying the value of DR focus on changes in utility system revenue requirements based on resource plans with and without DR. This ''utility centric'' approach does not assign any value to DR impacts that lower energy and capacity prices, improve reliability, lower system and network operating costs, produce better air quality, and provide improved customer choice and control. Proper valuation of these benefits requires a different basis for monetization. The review concludes that no single methodology today adequately captures the wide range of benefits and value potentially attributed to DR. To provide a more comprehensive valuation approach, current methods such as the Standard Practice Method (SPM) will most likely have to be supplemented with one or more alternative benefit-valuation approaches. This report provides an updated perspective on the DR valuation framework. It includes an introduction and four chapters that address the key elements of demand response valuation, a comprehensive literature review, and specific research recommendations.

  14. Integrated Portfolio Analysis: Return on Investment and Real Options Analysis of Intelligence Information Systems (Cryptologic Carry On Program)

    National Research Council Canada - National Science Library

    Rios, Jr., Cesar G; Housel, Thomas; Mun, Johnathan

    2006-01-01

    ...) on individual projects, programs, and processes within a portfolio of IT investments. Using KVA historical data as a platform, the authors evaluate potential strategic investments with real options analysis...

  15. Contextual and social influences on valuation and choice.

    Science.gov (United States)

    Engelmann, Jan B; Hein, Grit

    2013-01-01

    To survive in our complex environment, we have to adapt to changing contexts. Prior research that investigated how contextual changes are processed in the human brain has demonstrated important modulatory influences on multiple cognitive processes underlying decision-making, including perceptual judgments, working memory, as well as cognitive and attentional control. However, in everyday life, the importance of context is even more obvious during economic and social interactions, which often have implicit rule sets that need to be recognized by a decision-maker. Here, we review recent evidence from an increasing number of studies in the fields of Neuroeconomics and Social Neuroscience that investigate the neurobiological basis of contextual effects on valuation and social choice. Contrary to the assumptions of rational choice theory, multiple contextual factors, such as the availability of alternative choice options, shifts in reference point, and social context, have been shown to modulate behavior, as well as signals in task-relevant neural networks. A consistent picture that emerges from neurobiological results is that valuation-related activity in striatum and ventromedial prefrontal cortex is highly context dependent during both social and nonsocial choice. Alternative approaches to model and explain choice behavior, such as comparison-based choice models, as well as implications for future research are discussed. Copyright © 2013 Elsevier B.V. All rights reserved.

  16. Explaining the discrepancy between intentions and actions: the case of hypothetical bias in contingent valuation

    Science.gov (United States)

    Icek Ajzen; Thomas C. Brown; Franklin Carvajal

    2004-01-01

    An experiment was designed to account for intention-behavior discrepancies by applying the theory of planned behavior to contingent valuation. College students (N = 160) voted in hypothetical and real payment referenda to contribute $8 to a scholarship fund. Overestimates of willingness to pay in the hypothetical referendum could not be attributed to moderately...

  17. The Interaction between Real Options and Financial Hedging: An Empirical Study of Danish Non-Financial Companies

    DEFF Research Database (Denmark)

    Aabo, Tom

    The interaction between real options and financial hedging is analyzed empirically. A majority of Danish non-financial companies either (1) chooses at times not to hedge an exchange rate operating exposure financially due to the possibility of the company to react to changes in exchange rates...

  18. Real options and a large producer: the case of electricity markets

    International Nuclear Information System (INIS)

    Keppo, J.

    2003-01-01

    In this paper we extend the real option theory to consider the situation of a large producer and we employ the model to electricity markets. This is important because many producers in these markets affect the market supply and, therefore, also the electricity price. This production price effect influences not only on the assets that the energy company owns but also on its investment opportunities. We show that this production's price effect has to be considered in the investment analysis if the company is not able to hedge the price effect in the financial markets and if there is no competition on the investment opportunity. (author)

  19. Valuation and creative accounting

    Directory of Open Access Journals (Sweden)

    Maria Madalina VOINEA

    2014-06-01

    Full Text Available This paper deals with the economic and financial valuation, that is the only type of valuation, based on a diagnosis and expertise, which has as objective to establish the market value of elements, whether goods or businesses, being a "orientation tool" for the economic operators on the market. There are specific means to measure value but there are also some mechanisms that can influence the value obtained, from the category of creative accounting. Creative accounting occurs due to human intervention and even the most advanced accounting systems are not able to do this due to the lack of reasoning. There must be also assumed that it is possible that these creative accounting techniques may be caused by a simple mistake and not necessarily with the intention of manipulating the financial results and reports. The aim of the paper is to see how specific element valuation can influence the general one, namely the value of a company.

  20. Equity Valuation

    DEFF Research Database (Denmark)

    Christensen, Peter Ove; Feltham, Gerald A.

    , interest rates, expected equity returns, and inflation rates are all stochastic. We explicitly characterize the risk-adjustments to the fundamentals in an equilibrium setting. We show how the term structure of risk-adjustments depends on both the time-series properties of the free cash flows......-coupon interest rates. We show that standard estimates of the cost of capital, based on historical stock returns, are likely to be a significantly biased measure of the firm’s cost of capital, but also that the bias is almost impossible to quantify empirically. The new approach recognizes that, in practice......We review and critically examine the standard approach to equity valuation using a constant risk-adjusted cost of capital, and we develop a new valuation approach discounting risk-adjusted fundamentals, such as expected free cash flows and residual operating income, using nominal zero...

  1. The contingent valuation method: a review

    International Nuclear Information System (INIS)

    Venkatachalam, L.

    2004-01-01

    The contingent valuation method (CVM) is a simple, flexible nonmarket valuation method that is widely used in cost-benefit analysis and environmental impact assessment. However, this method is subject to severe criticism. The criticism revolves mainly around two aspects, namely, the validity and the reliability of the results, and the effects of various biases and errors. The major objective of this paper is to review the recent developments on measures to address the validity and reliability issues arising out of different kinds of biases/errors and other related empirical and methodological issues concerning contingent valuation method

  2. In or Out: The Effect of Euro Membership on the Exercise of Real Business Options

    DEFF Research Database (Denmark)

    Aabo, Tom; Pantzalis, Christos

    2011-01-01

    This empirical study of manufacturing firms (NAICS 33) in the EU15 countries goes beyond the trade statistics that have indicated only a small to negligible effect from the introduction of the Euro and shows that the introduction of the Euro has made Euro firms (firms based in one of the twelve...... Euro countries) more inclined than non-Euro firms (firms based in one of the three non-Euro countries: UK, Sweden and Denmark) to undertake various forms of real actions (exercise real business options) such as to establish alliances / partnerships, to enter new markets / market segments, to switch...

  3. Does the Valuation of Nutritional Claims Differ among Consumers? Insights from Spain

    Science.gov (United States)

    Jurado, Francesc; Gracia, Azucena

    2017-01-01

    The presence in the market of food products with nutritional claims is increasing. The objective of this paper is to assess consumers’ valuation of some nutritional claims (‘high in fiber’ and ‘reduced saturated fat’) in a European country and to test for differences among consumers. An artefactual non-hypothetical experiment was carried out in a realistic setting (mock/real brick-and-mortar supermarket) with a sample of 121 Spanish consumers stratified by gender, age, and body mass index. A latent class model was specified and estimated with the data from the experiment. Results indicate that consumers positively valued both nutritional claims, but the valuation was heterogeneous, and three consumer segments were detected. Two of them positively valued both nutritional claims (named ‘nutritional claim seekers’), while the third segment’s valuation was negative (named ‘nutritional claim avoiders’). This last segment is characterized by being younger males with university studies who give the least importance to health, natural ingredients, and the calorie/sugar/fat content when shopping. They pay less attention to nutritional information, and they stated that they use this information to a lesser extent. These consumers showed the least interest in healthy eating, and they reported that they do not have health problems related to their diet. PMID:28208811

  4. Does the Valuation of Nutritional Claims Differ among Consumers? Insights from Spain

    Directory of Open Access Journals (Sweden)

    Francesc Jurado

    2017-02-01

    Full Text Available The presence in the market of food products with nutritional claims is increasing. The objective of this paper is to assess consumers’ valuation of some nutritional claims (‘high in fiber’ and ‘reduced saturated fat’ in a European country and to test for differences among consumers. An artefactual non-hypothetical experiment was carried out in a realistic setting (mock/real brick-and-mortar supermarket with a sample of 121 Spanish consumers stratified by gender, age, and body mass index. A latent class model was specified and estimated with the data from the experiment. Results indicate that consumers positively valued both nutritional claims, but the valuation was heterogeneous, and three consumer segments were detected. Two of them positively valued both nutritional claims (named ‘nutritional claim seekers’, while the third segment’s valuation was negative (named ‘nutritional claim avoiders’. This last segment is characterized by being younger males with university studies who give the least importance to health, natural ingredients, and the calorie/sugar/fat content when shopping. They pay less attention to nutritional information, and they stated that they use this information to a lesser extent. These consumers showed the least interest in healthy eating, and they reported that they do not have health problems related to their diet.

  5. The Application of the Real Options Method for the Evaluation of High-Rise Construction Projects

    Science.gov (United States)

    Izotov, Aleksandr; Rostova, Olga; Dubgorn, Alissa

    2018-03-01

    The paper is devoted to the problem of evaluation of high-rise construction projects in a rapidly changing environment. The authors proposed an algorithm for constructing and embedding real options in high-rise construction projects, which makes it possible to increase the flexibility of managing multi-stage projects that have the ability to adapt to changing conditions of implementation.

  6. Stated Preference Methods for Valuation of Forest Attributes

    Science.gov (United States)

    Thomas P. Holmes; Kevin J. Boyle

    2003-01-01

    The valuation methods described in this chapter are based on the idea that forest ecosystems produce a wide variety of goods and services that are valued by people. Rather than focusing attention on the holistic value of forest ecosystems as is done in contingent valuation studies, attribute-based valuation methods (ABMs) focus attention on a set of attributes that...

  7. Natural resource valuation: A primer on concepts and techniques

    International Nuclear Information System (INIS)

    Ulibarri, C.A.; Wellman, K.F.

    1997-07-01

    Natural resource valuation has always had a fundamental role in the practice of cost-benefit analysis of health, safety, and environmental issues. The authors provide an objective overview of resource valuation techniques and describe their potential role in environmental restoration/waste management (ER/WM) activities at federal facilities. This handbook considers five general classes of valuation techniques: (1) market-based techniques, which rely on historical information on market prices and transactions to determine resource values; (2) nonmarket techniques that rely on indirect estimates of resource values; (3) nonmarket techniques that are based on direct estimates of resource values; (4) cross-cutting valuation techniques, which combine elements of one or more of these methods; and (5) ecological valuation techniques used in the emerging field of ecological economics. The various valuation techniques under consideration are described by highlighting their applicability in environmental management and regulation. The handbook also addresses key unresolved issues in the application of valuation techniques generally, including discounting future values, incorporating environmental equity concerns, and concerns over the uncertainties in the measurement of natural resource values and environmental risk

  8. COMPARATIVE ANALYSIS OF TAX OBJECT SALES VALUE ON LAND AND BUILDINGS WITH INDONESIAN VALUATION STANDARD (SIP-BASED VALUATION IN MALANG CITY

    Directory of Open Access Journals (Sweden)

    Gani I.F.

    2017-08-01

    Full Text Available This research aimed to explore how the valuation/appraisal in determining land and building values at Tax Object Sales Value on Land and Buildings (NJOP PBB in Malang City and to analyze the comparison between the valuation of Tax Object Sales Value on Land and Buildings (NJOP PBB conducted in Malang and the valuation of land and buildings according to Indonesian Valuation Standards (SPI. Through the qualitative research with a case study approach, it was obtained that the model of mass and individual appraisals on the valuation of Tax Object Sales Value on Land and Buildings (NJOP PBB had the similar stages to the individual appraisal according to Indonesian Valuation Standards (SPI. Furthermore, from the results, the problems faced in valuing Tax Object Sales Value on Land and Buildings (NJOP PBB by the Local Revenue Office of Malang City were also known. It can be used as a consideration for the improvement of regulation or procedure in valuing Tax Object Sales Value on Land and Buildings (NJOP PBB.

  9. Valuation of rangeland ecosystem services

    Science.gov (United States)

    Gascoigne, W.R.

    2011-01-01

    Economic valuation lends itself well to the anthropocentric orientation of ecosystem services. An economic perspective on ecosystems portrays them as natural assets providing a flow of goods and services valuable to individuals and society collectively. A few examples include the purification of drinking water, reduced risk from flooding and other extreme events, pollination of agricultural crops, climate regulation, and recreation opportunities from plant and animal habitat maintenance, among many others. Once these goods and services are identified and quantified, they can be monetized to complete the valuation process. The monetization of ecosystem goods and services (in the form of dollars) provides a common metric that allows for cross-comparison of attributes and evaluation of differing ecological scenarios. Complicating the monetization process is the fact that most of these goods and services are public and non-market in nature; meaning they are non-rival and non-exclusive and are typically not sold in a traditional market setting where monetary values are revealed. Instead, one must employ non-market valuation techniques, with primary valuation methods typically being very time and resource consuming, intimidating to non-economists, and often impractical. For these reasons, benefit transfer methods have gained popularity. This methodology harnesses the primary collection results of existing studies to make inferences about the economic values of non-market goods and services at an alternative policy site (in place and/or in time). For instance, if a primary valuation study on oak reestablishment on rangelands in southern California yielded a value of $30 per-acre associated with water regulation, this result can be transferred, with some adjustments, to say something about the value of an acre of oaks on rangelands in northern portions of the state. The economic valuation of rangeland ecosystem services has many roles. Economic values may be used as input

  10. Model Calibration in Option Pricing

    Directory of Open Access Journals (Sweden)

    Andre Loerx

    2012-04-01

    Full Text Available We consider calibration problems for models of pricing derivatives which occur in mathematical finance. We discuss various approaches such as using stochastic differential equations or partial differential equations for the modeling process. We discuss the development in the past literature and give an outlook into modern approaches of modelling. Furthermore, we address important numerical issues in the valuation of options and likewise the calibration of these models. This leads to interesting problems in optimization, where, e.g., the use of adjoint equations or the choice of the parametrization for the model parameters play an important role.

  11.  Euro Membership as a Real Option Trigger: An Empirical Study of EU15 Manufacturing Firms

    DEFF Research Database (Denmark)

    Aabo, Tom

    ) to exercise real options such as to establish alliances / partnerships, to enter new markets / market segments, to switch suppliers, and to generally expand in the Euro-area. The results are robust after controlling for the size of the firms and their sales in the Euro-area. The results go beyond what...

  12. SalMar ASA : Strategic analysis and valuation

    OpenAIRE

    Augenstein, Daniel

    2017-01-01

    The objective of this thesis is to estimate the theoretical value of equity for SalMar ASA and thereby the value per share at 27.11.2017. Fundamental valuation through a two-stage discounted cash flow model is chosen as the main method, while a valuation using comparable firms is performed as a supplement. In the fundamental valuation I have estimated the enterprise value by discounting the expected future cash flows to present value. To find the value of equity, the net-intere...

  13. Valuation of Geothermal Wells on Real Property

    Energy Technology Data Exchange (ETDEWEB)

    Rafferty, Kevin

    2001-12-01

    The Geo-Heat Center is often contacted by individual property owners, real estate professionals and others for assistance in the evaluation of geothermal resources in real property transactions. This document is a summary of information on the methods we have suggested to approach this situation in the past. The first of these methods is employed in situations in which the geothermal resource is in use serving some application. The second approach is for situations in which there is a known well on the property but it is not currently in use. The information presented here does not address situations in which the property is underlain by suspected geothermal resources for which there is no surface manifestation or existing development. The information contained in this document is intended to address large capacity wells of the type that would be used for commercial geothermal applications.

  14. Intelligent databases assist transparent and sound economic valuation of ecosystem services.

    Science.gov (United States)

    Villa, Ferdinando; Ceroni, Marta; Krivov, Sergey

    2007-06-01

    Assessment and economic valuation of services provided by ecosystems to humans has become a crucial phase in environmental management and policy-making. As primary valuation studies are out of the reach of many institutions, secondary valuation or benefit transfer, where the results of previous studies are transferred to the geographical, environmental, social, and economic context of interest, is becoming increasingly common. This has brought to light the importance of environmental valuation databases, which provide reliable valuation data to inform secondary valuation with enough detail to enable the transfer of values across contexts. This paper describes the role of next-generation, intelligent databases (IDBs) in assisting the activity of valuation. Such databases employ artificial intelligence to inform the transfer of values across contexts, enforcing comparability of values and allowing users to generate custom valuation portfolios that synthesize previous studies and provide aggregated value estimates to use as a base for secondary valuation. After a general introduction, we introduce the Ecosystem Services Database, the first IDB for environmental valuation to be made available to the public, describe its functionalities and the lessons learned from its usage, and outline the remaining needs and expected future developments in the field.

  15. Valuation of Non-Life Liabilities from Claims Triangles

    Directory of Open Access Journals (Sweden)

    Mathias Lindholm

    2017-07-01

    Full Text Available This paper provides a complete program for the valuation of aggregate non-life insurance liability cash flows based on claims triangle data. The valuation is fully consistent with the principle of valuation by considering the costs associated with a transfer of the liability to a so-called reference undertaking subject to capital requirements throughout the runoff of the liability cash flow. The valuation program includes complete details on parameter estimation, bias correction and conservative estimation of the value of the liability under partial information. The latter is based on a new approach to the estimation of mean squared error of claims reserve prediction.

  16. The valuation of environmental externalities in energy conservation planning

    International Nuclear Information System (INIS)

    Chernick, P.L.; Caverhill, E.J.

    1990-01-01

    The determination of the full societal costs of energy usage must incorporate estimates of the environmental effects, or externalities, of energy production and delivery. An externality is any cost or benefit that is not reflected in the price paid by a utility or its customers for energy produced or consumed. The potential variety and scope of externality analyses are discussed. Four methods of externality valuation are briefly discussed to highlight the uses, strengths and pitfalls of each method. The use of pollutants' relative potency, polling of experts, direct estimation of costs, and implied valuation, are compared. The authors preferred method of valuation for near-term energy supply decisions, implied valuation, is discussed in detail. The distinguishing feature of the implied valuation technique is its use of the cost of control, rather than the direct cost of emissions. Only the most expensive required control measure is relevant to valuation of the external effects. The difficulties in applying implied valuation, such as the definition of the margin, the multiple effects of pollutants and the imperfect nature of the regulatory system, are also considered. The effect of environmental externalities on the benefits of conservation are summarized

  17. Equilibrium Asset and Option Pricing under Jump-Diffusion Model with Stochastic Volatility

    Directory of Open Access Journals (Sweden)

    Xinfeng Ruan

    2013-01-01

    Full Text Available We study the equity premium and option pricing under jump-diffusion model with stochastic volatility based on the model in Zhang et al. 2012. We obtain the pricing kernel which acts like the physical and risk-neutral densities and the moments in the economy. Moreover, the exact expression of option valuation is derived by the Fourier transformation method. We also discuss the relationship of central moments between the physical measure and the risk-neutral measure. Our numerical results show that our model is more realistic than the previous model.

  18. Assessing the Option to Abandon an Investment Project by the Binomial Options Pricing Model

    Directory of Open Access Journals (Sweden)

    Salvador Cruz Rambaud

    2016-01-01

    Full Text Available Usually, traditional methods for investment project appraisal such as the net present value (hereinafter NPV do not incorporate in their values the operational flexibility offered by including a real option included in the project. In this paper, real options, and more specifically the option to abandon, are analysed as a complement to cash flow sequence which quantifies the project. In this way, by considering the existing analogy with financial options, a mathematical expression is derived by using the binomial options pricing model. This methodology provides the value of the option to abandon the project within one, two, and in general n periods. Therefore, this paper aims to be a useful tool in determining the value of the option to abandon according to its residual value, thus making easier the control of the uncertainty element within the project.

  19. Currency Valuation and Purchasing Power Parity

    OpenAIRE

    Jamal Ibrahim Haidar

    2011-01-01

    This paper aims to highlight key limitations of The Economist magazine’s Big Mac Index (BMI). The Economist markets the BMI as a tool to determine valuation of currencies. This paper shows that the BMI is a misleading measure of currency valuation for economies whose markets are structurally different from the benchmark currency countries.

  20. MASS APPRAISAL AND REAL ESTATE TAXATION

    Directory of Open Access Journals (Sweden)

    VORONIN V. О.

    2015-12-01

    Full Text Available Raising of problem. The government at the legislative level fixed the definition of market value for tax purposes as mandatory in the implementation of real estate transactions. In order to meet the requirements of objectivity, uniformity and consistency of the results obtained during the evaluation procedures, as well as minimize the influence of subjective factors, there is a need to develop a methodology for evaluating an automated procedure for determining the estimated value of the property based on its market value. To solve this problem, we use special techniques and methods of mass appraisal that incorporates computer-supported statistical analyses, such as multiple regression analysis and adaptive estimation procedure for use in the field of property valuation and property rights. Purpose. Realization of this goal involves the development of the concept of a computer-assisted mass appraisal. The basis of this concept is an adaptive hybrid models of market pricing in different market segments that incorporates software adaptive algorithms for determining the market value by the three evaluation approaches using the results of a multi-level real estate market analysis. It was proposed the utility automated valuation models which is intended for the implementation of a computerized real estate valuation based on the developed software adaptive algorithms. Con-clusion. To achieve this goal have been developed and used concepts underlying of computerized mass appraisal. The basis of this concept is adaptive hybrid pricing models in various segments of the real estate market of Ukraine. The problem is solved by the application of the developed software-based adaptive algorithms for determining the market value of three evaluation approaches using the results of a multi-level analysis of the real estate market. It was pro-posed the model of automated appraisal, according to it was implemented computerization of appraisal procedures on the

  1. Survey data on factors affecting negotiation of professional fees between Estate Valuers and their clients when the mortgage is financed by bank loan: A case study of mortgage valuations in Ikeja, Lagos State, Nigeria.

    Science.gov (United States)

    Iroham, Chukwuemeka O; Okagbue, Hilary I; Ogunkoya, Olalekan A; Owolabi, James D

    2017-06-01

    In this article, two sets of questionnaires were administered to professionals and clients (commercial banks) on their willingness to negotiate the professional fees charged by the Estate Valuers assuming that the mortgage in valuation was financed by bank loan. A range of fees options were provided. Other factors such as the business environment and mortgage valuation can influence the negotiated fees when the data obtained from the survey data is analyzed.

  2. Five essays in property valuation

    OpenAIRE

    Yang, Zan

    2000-01-01

    This doctoral thesis consists of five self-contained essayspresented to the Faculty Board of the Royal Institute ofTechnology. Property valuation is a central issue that forms acommon thread in the analysis in these essays. In the thesisproperty is considered in a mixed asset context in an attemptto build a bridge between valuation, property investment andfinancial theory. The object of the thesis is to value propertyfor finance, sales and purchases and investment. Theinvestigation of the the...

  3. A discontinuous Galerkin method for numerical pricing of European options under Heston stochastic volatility

    Science.gov (United States)

    Hozman, J.; Tichý, T.

    2016-12-01

    The paper is based on the results from our recent research on multidimensional option pricing problems. We focus on European option valuation when the price movement of the underlying asset is driven by a stochastic volatility following a square root process proposed by Heston. The stochastic approach incorporates a new additional spatial variable into this model and makes it very robust, i.e. it provides a framework to price a variety of options that is closer to reality. The main topic is to present the numerical scheme arising from the concept of discontinuous Galerkin methods and applicable to the Heston option pricing model. The numerical results are presented on artificial benchmarks as well as on reference market data.

  4. Societal and economic valuation of technology-transfer deals

    Science.gov (United States)

    Holmes, Joseph S., Jr.

    2009-09-01

    The industrial adoption of concepts such as open innovation brings new legitimacy to activities technology-transfer professionals have conducted for over 20 years. This movement highlights the need for an increased understanding of the valuation of intellectual property (IP) and technology-transfer deals. Valuation, though a centerpiece of corporate finance, is more challenging when applied to the inherent uncertainty surrounding innovation. Technology-transfer professionals are often overwhelmed by the complexity and data requirements of valuation techniques and skeptical of their applicability to and utility for technology transfer. The market longs for an approach which bridges the gap between valuation fundamentals and technology-transfer realities. This paper presents the foundations of a simple, flexible, precise/accurate, and useful framework for considering the valuation of technology-transfer deals. The approach is predicated on a 12-factor model—a 3×4 value matrix predicated on categories of economic, societal, and strategic value. Each of these three categories consists of three core subcategories followed by a fourth "other" category to facilitate inevitable special considerations. This 12-factor value matrix provides a framework for harvesting data during deals and for the application of best-of-breed valuation techniques which can be employed on a per-factor basis. Future work will include framework implementation within a database platform.

  5. Administrateur de programme principal, Évaluation (h/f) | CRDI ...

    International Development Research Centre (IDRC) Digital Library (Canada)

    amélioration du système d'évaluation du Centre. ... méthodes de planification, de suivi et d'évaluation de la recherche au service du développement;; appuie les recherches sur des outils et des méthodes d'évaluation effectuées par des partenaires ...

  6. 26 CFR 20.2032-1T - Alternate valuation (temporary).

    Science.gov (United States)

    2010-04-01

    ...) the value of the property as of the alternate valuation date. For example, assume that the decedent... 26 Internal Revenue 14 2010-04-01 2010-04-01 false Alternate valuation (temporary). 20.2032-1T...-1T Alternate valuation (temporary). (a) through (e) [Reserved] For further guidance, see § 20.2032-1...

  7. Relative level of occurrence of the principal heuristics in Nigeria property valuation

    Directory of Open Access Journals (Sweden)

    Iroham C.O.,

    2013-06-01

    Full Text Available The neglect of the other principal heuristics namely avaialability, representative and positivity in real estate behaviourial property research as against the exclusive focus on anchoring and adjustment heuristics invariably results to a lopsided research. This work studied the four principal heuristics in property behaviourial property valutaion in a bid to discovering its relative level of occurrence. The study adopted a cross-sectional questionnaire survey approach of 159 of the 270 Head Offices of Estate Surveying and Valuation firms in Lagos Metropolis, while 29 and 30 questionnaire were distributed to the Head Offices of the entire Estate Surveying and Valuation Firms in Abuja and Port-Harcourt respectively. The data gotten was analyzed with the aid of Statistical Package for the Social Sciences first using frequency distributions/means and the data so analyzed was further analyzed using maximum and minimum values, means/standard deviations and ultimately ranking of such means. The result revealed that respondents use the various principal heuristics in this decreasing order of magnitude: availability heuristics (26.77%, anchoring and adjustment heuristics (18.62%; representative heuristics (15.63% and least of all positivity heuristics (10.41%. The authors thereby opined that emphasis be placed more on availability heuristics research particularly as usage of heuristcis (anchoring and adjustment has been seen to influence valuation inconsistency/accuracy

  8. Risk-neutral valuation of real estate derivatives

    NARCIS (Netherlands)

    van Bragt, D.; Francke, M.K.; Singor, S.N.; Pelsser, A.

    2015-01-01

    Despite the importance of residential real estate as both an asset class for investors and as a source of "housing services" for individual home owners, as well as the relatively high volatility in house prices, markets for derivative instruments to hedge these risks have been slow to develop. The

  9. Lobatto-Milstein Numerical Method in Application of Uncertainty Investment of Solar Power Projects

    Directory of Open Access Journals (Sweden)

    Mahmoud A. Eissa

    2017-01-01

    Full Text Available Recently, there has been a growing interest in the production of electricity from renewable energy sources (RES. The RES investment is characterized by uncertainty, which is long-term, costly and depends on feed-in tariff and support schemes. In this paper, we address the real option valuation (ROV of a solar power plant investment. The real option framework is investigated. This framework considers the renewable certificate price and, further, the cost of delay between establishing and operating the solar power plant. The optimal time of launching the project and assessing the value of the deferred option are discussed. The new three-stage numerical methods are constructed, the Lobatto3C-Milstein (L3CM methods. The numerical methods are integrated with the concept of Black–Scholes option pricing theory and applied in option valuation for solar energy investment with uncertainty. The numerical results of the L3CM, finite difference and Monte Carlo methods are compared to show the efficiency of our methods. Our dataset refers to the Arab Republic of Egypt.

  10. Participatory Environmental Valuation: A Comparative Analysis of Four Case Studies

    Directory of Open Access Journals (Sweden)

    Leslie Carnoye

    2015-07-01

    Full Text Available The valuation of multiple ecosystem services requires the design of valuation processes able to integrate different dimensions of value and to cope with complexity. Following the “value-articulating institution” framework, we note that three core problems arise: the cognitive, normative and composition problems. Combining valuation methods, such as contingent valuation and multicriteria analysis, with participatory and deliberative techniques is increasingly promoted as a means to address those fundamental problems. However, the quality and legitimacy of the valuation process then becomes dependent on how participation is framed. We note that numerous issues need to be taken into account, such as the roles assumed by participants, the differences in contribution among participants, the level of participatory impact and the level of democratization of the decision-making process. This paper proposes a detailed qualitative analysis of four case studies, each of them having implemented a specific valuation method in a participatory process. We analyze how those cases were handled in each of the dimensions considered and offer our conclusions about the added values and remaining challenges related to participatory environmental valuation.

  11. Valuation of inventories in systems with product recovery

    OpenAIRE

    Teunter, Ruud; Laan, Erwin

    2003-01-01

    textabstractValuation of inventories has different purposes, in particular accounting and decision making, and it is not necessary for a firm to use the same valuation method for both purposes. In fact, it is not uncommon to use accounting books as well as management books. In this chapter, we will only consider inventory values from the perspective of decision making. More specifically, we will analyze the effect of inventory valuation on inventory control decisions (and not the correspondin...

  12. A valuation-Based Test of Market Timing

    NARCIS (Netherlands)

    Koeter-Kant, J.; Elliott, W.B.; Warr, R.S.

    2007-01-01

    We implement an earnings-based fundamental valuation model to test the impact of market timing on the firm's method of funding the financing deficit. We argue that our valuation metric provides a superior measure of equity misvaluation because it avoids multiple interpretation problems faced by the

  13. Flexibility in using Diesel or biodiesel: an approach via real options; Flexibilidade na utilizacao de Diesel ou biodiesel: uma abordagem via opcoes reais

    Energy Technology Data Exchange (ETDEWEB)

    Goncalves, Edson Daniel Lopes [Fundacao Getulio Vargas, Rio de Janeiro, RJ (Brazil)]. E-mail: edson@fgvmail.br; Ferreira, Leonardo Leandro [PETROBRAS, Rio de Janeiro, RJ (Brazil)]. E-mail: leonardo.ferreira@petrobras.com.br

    2008-09-15

    This work will approach the bio diesel development as renewable source fuel in the Brazilian energetic matrix. Essentially, the utilization flexibility will be considered between the traditional petroleum origin Diesel and the vegetable origin Biodiesel. So, our target is the evaluation of the flexibility existent between those two fuels. A consideration will be made via real options, where the fuel choice for supplying is modelled as a an european options sequence. Those switch input real options attributes a value to the project and minimizes the risks associated to the energy offer shortage which is another recurrent problem inside our reality. At least, some comments will be made on the potential gain on the aggregate value for the Brazil, as a consequence of Diesel dependent road transportation.

  14. Survey data on factors affecting negotiation of professional fees between Estate Valuers and their clients when the mortgage is financed by bank loan: A case study of mortgage valuations in Ikeja, Lagos State, Nigeria

    Directory of Open Access Journals (Sweden)

    Chukwuemeka O. Iroham

    2017-06-01

    Full Text Available In this article, two sets of questionnaires were administered to professionals and clients (commercial banks on their willingness to negotiate the professional fees charged by the Estate Valuers assuming that the mortgage in valuation was financed by bank loan. A range of fees options were provided. Other factors such as the business environment and mortgage valuation can influence the negotiated fees when the data obtained from the survey data is analyzed.

  15. Comparing Contingent Valuation, Conjoint Analysis and decition Panels: An Application to the valuation of reduced damages from air pollution in Norway

    Energy Technology Data Exchange (ETDEWEB)

    Halvorsen, B.; Strand, J.; Saelensminde, K.; Wenstoep, F.

    1996-12-31

    The need for assessing values of non-market goods has led to the development of two main groups of valuation approaches, those based on revealed preferences, and those on stated preferences (SP). One of the stated preference approaches, the Contingent Valuation Method, has recently been heavily criticized and alternative SP valuation approaches have appeared. This report discusses three SP approaches to eliciting willingness to pay (WTP) for environmental goods, namely open-ended contingent valuation (OE-CVM), conjoint analysis (CA) and multi-attribute utility theory applied to decision panels of experts (DPE). Each approach has advantages and disadvantages relative to the others and the relation between WTP estimates from the approaches cannot be predicted on prior arguments alone. The three approaches are applied in three different surveys, seeking valuation of specific damages due to air pollution in Norway. In all cases studied, OE-CVM yields the lowest average WTP estimate, while those from CA and EDP are similar. Possible explanations are offered, based on the principle differences between the approaches and on particular features of the three surveys. 35 refs., 10 tabs.

  16. 29 CFR 4044.41 - General valuation rules.

    Science.gov (United States)

    2010-07-01

    ... part 4044.) (b) Valuation of assets. Plan assets shall be valued at their fair market value, based on the method of valuation that most accurately reflects such fair market value. Trusteed Plans ... been or will be placed into trusteeship by the PBGC shall value plan benefits in accordance with...

  17. Trust in a viable real estate economy with disruption and blockchain

    OpenAIRE

    Veuger, Jan

    2017-01-01

    Does real estate still have the value that it once had, or will the valuation of real estate change due to surprising products and services, innovative business models, different market strategies, innovative ways of organizing and managing in the (real estate) markets? Innovation revolves around good facilities in an attractive and stimulating environment. Take disruptive real estate. The driving force behind these developments are new technology, viability, organizing differently and managi...

  18. A Study on the Economic Analysis for Overseas Project of New Nuclear Power Plant Using Binomial Option Pricing Model and Monte Carlo Simulation

    Energy Technology Data Exchange (ETDEWEB)

    Kim, Beong Gwon; Roh, Myung Sub [KEPCO International Nuclear Graduate School, Ulsan (Korea, Republic of)

    2014-10-15

    Real options approach is suitable for evaluation of large-scale investment project with great uncertainties. Takizawa and Omori (2001) introduced a real option approach to calculate electricity price for economic feasibility. Rothwell (2006) modeled the net present value (NPV) of building an ABWR in Texas using ROA to determine the risk premium associated with net revenue uncertainty. W.C Yoon (2006) evaluated nuclear power plant construction value using DCF and ROA with sensitivity analysis. The value evaluations involved with nuclear power are very uncertain. This is because of a long period of construction as well as the cost uncertainties of decommissioning and nuclear waste management. Even more elements should be considered in new nuclear power valuation, including the uncertainty from the technology, operating costs, the potential risk of radiation, electricity mechanism and climate policy. In this respect, a traditional method such as discounted cash flow (DCF) can't fully catch the impacts of these uncertainties on nuclear power investment. So it is necessary to develop a proper method to handle such kinds of uncertainties to evaluate the new deployment of nuclear power plants. Meanwhile, overseas construction projects which are required capital investment, localization by target countries are increasing in these days. These elements may influence the uncertainty of project too.

  19. 36 CFR 254.42 - Valuation of tracts.

    Science.gov (United States)

    2010-07-01

    ... 36 Parks, Forests, and Public Property 2 2010-07-01 2010-07-01 false Valuation of tracts. 254.42 Section 254.42 Parks, Forests, and Public Property FOREST SERVICE, DEPARTMENT OF AGRICULTURE LANDOWNERSHIP ADJUSTMENTS Conveyance of Small Tracts § 254.42 Valuation of tracts. (a) Approximately equal value shall be...

  20. Problems of valuation and organization in energy markets

    International Nuclear Information System (INIS)

    Porchet, A.

    2008-01-01

    In the past thirty years, the electricity industry has experienced significant structural changes in its organization all over the world. Traditionally centralized and organized in monopolies, at least locally, and often publicly owned, the activities of electricity production and retail have moved towards a market-based organization. Nowadays, a significant number of countries host electricity wholesale markets where producers and retailers exchange electricity to satisfy the demand of end consumers. These markets are not strictly national and the volume of cross-border exchanges is increasing. The question of the organization of these markets is crucial with regards to the direct consequences in cases of failure (we refer for example to the California crisis or the Enron scandal in 2001). The whole set of energy markets has been transformed in a broader context of demand growth, threat of exhaustion of fossil energies, environmental awareness and political tensions for the access to natural resources. Beside an oil market under pressure, the gas and coal markets have seen their volumes increasing. The ratification of the Kyoto protocol and the enforcement of a greenhouse gases reduction policy have lead to the creation of markets for emissions permits and stimulated the use of renewable and nuclear energies and biofuels. The increasing exposure of the world economy to energy prices incited the financial markets to develop new commodity risk management products (energy, agriculturals, metals). These are price risk and also volume risk management products, in order to hedge the risk of fluctuating demand. These are also derivatives or insurance products against weather risk. This PhD dissertation keeps within this context. It is composed of four chapters that are independent of each other. The first chapter concerns the valuation of physical assets such as thermal power plants. This Real Option valuation method is based on a utility indifference analysis and

  1. APPLICATION OF DIVIDEND DISCOUNT MODEL VALUATION AT MACEDONIAN STOCK-EXCHANGE

    Directory of Open Access Journals (Sweden)

    Zoran Ivanovski

    2015-06-01

    Full Text Available Dividend discount model (DDM is the simplest model for valuing equities in finance. Many analysts belived that DDM is outmoded, but much of the intuition that drives Discounted Cash Flow (DCF valuation is embedded in the DDM model. There are also specific companies stocks where the DDM model remains a useful tool for estimating value. The basic task of these research is to examine if DDM models offer relevant and safe valuation of long-term securities at Macedonian Stock Exchange (MSE through the process of empirical valuation of random chosen stocks. This research helped us to identify problems in use of DDM valuation models at MSE, to determine causes for differences between the intrinsic values and the stock market prices and to determine basic parameters for implementation of valuation on Macedonian financial market. We find that DDM models are usefull only as additional tool beside relative and DCF stocks valuation at MSE.

  2. REAL OPTIONS ANALYSIS OF RENEWABLE ENERGY INVESTMENT SCENARIOS IN THE PHILIPPINES

    Directory of Open Access Journals (Sweden)

    Casper Agaton

    2017-12-01

    Full Text Available Abstract - With the continuously rising energy demand and much dependence on imported fossil fuels, the Philippines is developing more sustainable sources of energy. Renewable energy seems to be a better alternative solution to meet the country’s energy supply and security concerns. Despite its huge potential, investment in renewable energy sources is challenged with competitive prices of fossil fuels, high start-up cost and lower feed-in tariff rates for renewables. To address these problems, this study aims to analyze energy investment scenarios in the Philippines using real options approach. This compares the attractiveness of investing in renewable energy over continuing to use coal for electricity generation under uncertainties in coal prices, investments cost, electricity prices, growth of investment in renewables, and imposing carbon tax for using fossil fuels.

  3. Renewable energy investments under different support schemes: A real options approach

    DEFF Research Database (Denmark)

    Boomsma, Trine Krogh; Meade, Nigel; Fleten, Stein-Erik

    2012-01-01

    -in tariff encourages earlier investment. Nevertheless, as investment has been undertaken, renewable energy certificate trading creates incentives for larger projects. In our baseline scenario and taking the fixed feed-in tariff as a base, the revenue required to trigger investments is 61% higher......This paper adopts a real options approach to analyze investment timing and capacity choice for renewable energy projects under different support schemes. The main purpose is to examine investment behavior under the most extensively employed support schemes, namely, feed-in tariffs and renewable...... energy certificate trading. We consider both multiple sources of uncertainty under each support scheme and uncertainty with respect to any change of support scheme, and we obtain both analytical (when possible) and numerical solutions. In a Nordic case study based on wind power, we find that the feed...

  4. Intangibles and methods for their valuation in financial terms: Literature review

    Directory of Open Access Journals (Sweden)

    Damián Pastor

    2017-02-01

    Full Text Available Purpose: The purpose of this paper is to review literature devoted to intangibles and their valuation and give examples of the methods that can be used for valuation of individual intangibles in financial terms. Design/methodology/approach: Paper presents a systematic review of articles dedicated to intangibles and their valuation. Findings: This review shows that there is a need for consensus in definitions of intangibles, intangible assets, knowledge assets and other related terms. These terms are used interchangeably in spite of their different meanings. Many methods for valuation of intangibles can be found in the literature, but widely accepted list of basic intangibles with suggested methods for their valuation in financial terms is still missing. Research limitations/implications: Not all the papers related to this topic could be covered in this paper. Presented list of important intangible components may be enhanced and examples of some other methods for their valuation may be added in the future. Practical implications: Paper calls for development of framework comprising list of the most important intangibles, proposals of methods used for their valuation and examples of their use. This framework can be helpful for organization, which are confronted with a difficult task of intangibles valuation. Originality/value: Basic definitions and differences between intangibles, intangible assets, identifiable intangible assets, knowledge assets and intellectual capital have not been mentioned in one paper yet. List of intangibles and methods for their valuation gives a direction for future work that can be fruitful for valuation of intangibles.

  5. Using Priced Options to Solve the Exposure Problem in Sequential Auctions

    Science.gov (United States)

    Mous, Lonneke; Robu, Valentin; La Poutré, Han

    This paper studies the benefits of using priced options for solving the exposure problem that bidders with valuation synergies face when participating in multiple, sequential auctions. We consider a model in which complementary-valued items are auctioned sequentially by different sellers, who have the choice of either selling their good directly or through a priced option, after fixing its exercise price. We analyze this model from a decision-theoretic perspective and we show, for a setting where the competition is formed by local bidders, that using options can increase the expected profit for both buyers and sellers. Furthermore, we derive the equations that provide minimum and maximum bounds between which a synergy buyer's bids should fall in order for both sides to have an incentive to use the options mechanism. Next, we perform an experimental analysis of a market in which multiple synergy bidders are active simultaneously.

  6. Subjective Well-Being Approach to Environmental Valuation: Evidence for Greenhouse Gas Emissions

    Science.gov (United States)

    Beja, Edsel L., Jr.

    2012-01-01

    The subjective well-being approach to environmental valuation is applied to analyze the valuation of greenhouse gas emissions with a fairness-adjustment in the valuation exercise. Results indicate that industrialized countries have high willingness-to-pay to reduce emissions. Developing countries differ in their valuations. Results indicate that…

  7. Log-Concavity Properties of Minkowski Valuations

    OpenAIRE

    Berg, Astrid; Parapatits, Lukas; Schuster, Franz E.; Weberndorfer, Manuel

    2014-01-01

    New Orlicz Brunn-Minkowski inequalities are established for rigid motion compatible Minkowski valuations of arbitrary degree. These extend classical log-concavity properties of intrinsic volumes and generalize seminal results of Lutwak and others. Two different approaches which refine previously employed techniques are explored. It is shown that both lead to the same class of Minkowski valuations for which these inequalities hold. An appendix by Semyon Alesker contains the proof of a new clas...

  8. Investment Valuation Analysis with Artificial Neural Networks

    Directory of Open Access Journals (Sweden)

    Hüseyin İNCE

    2017-07-01

    Full Text Available This paper shows that discounted cash flow and net present value, which are traditional investment valuation models, can be combined with artificial neural network model forecasting. The main inputs for the valuation models, such as revenue, costs, capital expenditure, and their growth rates, are heavily related to sector dynamics and macroeconomics. The growth rates of those inputs are related to inflation and exchange rates. Therefore, predicting inflation and exchange rates is a critical issue for the valuation output. In this paper, the Turkish economy’s inflation rate and the exchange rate of USD/TRY are forecast by artificial neural networks and implemented to the discounted cash flow model. Finally, the results are benchmarked with conventional practices.

  9. Valuation Biases, Error Measures, and the Conglomerate Discount

    NARCIS (Netherlands)

    I. Dittmann (Ingolf); E.G. Maug (Ernst)

    2006-01-01

    textabstractWe document the importance of the choice of error measure (percentage vs. logarithmic errors) for the comparison of alternative valuation procedures. We demonstrate for several multiple valuation methods (averaging with the arithmetic mean, harmonic mean, median, geometric mean) that the

  10. Valuation in life sciences: a practical guide

    National Research Council Canada - National Science Library

    Bogdan, Boris; Villiger, Ralph

    2010-01-01

    ... apply valuation methodologies in life sciences. One of the complicating factors is that, compared to other industries, valuation of biotech innovation is much more demanding. The long 10-15-year development and clinical trials process still represents the main risks faced by any biotech company. Added to that is the fact that getting a drug across the regulato...

  11. 26 CFR 25.2512-1 - Valuation of property; in general.

    Science.gov (United States)

    2010-04-01

    ... 26 Internal Revenue 14 2010-04-01 2010-04-01 false Valuation of property; in general. 25.2512-1... valuation of other particular kinds of property. See § 25.2702-6 for an adjustment to the total amount of an... AND GIFT TAXES GIFT TAX; GIFTS MADE AFTER DECEMBER 31, 1954 Transfers § 25.2512-1 Valuation of...

  12. VALUATION TECHNIQUES USED IN FAIR VALUE MEASUREMENT

    Directory of Open Access Journals (Sweden)

    Cristina-Aurora, BUNEA-BONTAS

    2013-12-01

    Full Text Available Valuation of assets and liabilities involves significant judgements and estimates, especially when fair value measurement is required. Currently, IFRS 13 Fair Value Measurement offers a single and more comprehensive source of guidance that is applied to almost all fair value estimates. When measuring fair value of fixed assets, intangible assets, specified financial assets or liabilities, different valuation techniques may be used: the market approach, the cost approach and the income approach. This article reviews these techniques and points out that different valuation practices may provide different results depending on the item being fair valued and on the inputs used. Also it emphasizes that, in particular circumstances, there is the possibility that a certain technique may be more appropriate than other.

  13. DCF Fair Value Valuation, Excessive Assetes and Hidden Inefficiencies

    Directory of Open Access Journals (Sweden)

    Paweł Mielcarz

    2011-12-01

    Full Text Available Fair value concept is widely used in DCF (Discounted Cash Flow  business valuation. One of the main principle of fair value concept is full information symmetry between contracting parties. The assumption enforces specific way of FCF (Free Cash Flow estimation: all areas of inefficiency of valuated companies should be identified and their effect on free cash flow should be eliminated. The projection of free cash flow thus prepared should reflect the optimum operations of the business. The methodological issues of fair value valuation of inefficient companies are not comprehensibly addressed in the financial and accounting literature. There is easily observable gap between fair value theory and valuation practices. Thus this article is an attempt to answer the question about practical issues in fair value valuation of companies which do not apply value based management rules. It is based on literature review, theory examination and short case studies which present proposed solution for practical problems. Methods of identification and assessment of impact of inefficiencies on the fair value of a business are hereinafter presented and supported with arguments.

  14. What makes and what does not make a real option? A study of equity shares in international joint ventures

    NARCIS (Netherlands)

    Cuypers, I.R.P.; Martin, Xavier

    2010-01-01

    This paper examines the boundaries of real options logic, with an application to joint ventures (JVs). We distinguish between forms of uncertainty that are resolved endogenously and those that are resolved exogenously, and theorize that only exogenous uncertainty will have the impact predicted by

  15. Valuation of Residential Premises for the Purposes of Securing the Receivables of the Creditor in Poland

    Science.gov (United States)

    Hełdak, Maria; Stacherzak, Agnieszka

    2017-10-01

    The study presents an analysis of the theoretical and practical issues connected with securing the receivables of creditors, in particular the principles connected with the appraisal of real property value used for the purposes of granting loans in Poland. The scope of research included the basic elements of the functioning and organisation of the Polish banking system, legal forms of securing debt receivables and the principles of real property valuation for universal and mortgage banks. Additionally, the authors have conducted an analysis of the number and amount of loans granted in Poland in the years 2009 - 2016

  16. The appraisal rationalisation of real estate expertise

    Directory of Open Access Journals (Sweden)

    Marina Ciuna

    2013-12-01

    Full Text Available The Italian appraisal practice is characterized by valuations developed in subjective opinions formulated by the valuers, according to the experience and the competence rather than on the survey of the market data of comparable properties. This practice makes up for the lack of information on the real estate market and to the consequent absence of systematic collections of market data. This tradition is in the cadastral appraisal for the rural (1886 and urban properties (1939. The assessed income is appraised for a representative property and wide to all the other properties with arbitrary scores (pure number. The assessed value is derived from the income with fixed multipliers. The reform of the cadastral appraisals (2013 provides the employment of predetermined statistic functions rather than the automated valuation models applied in the mass appraisal. There are therefore ample spaces to rationalize the Italian valuations. For the market appraisal the process of rationalization is based on the comparison between the expertise and the market comparison approach. For the cadastral appraisal the process of rationalization is based on the statistic application to the fixed functions with the survey of a sample of market prices and the ratios study according to the valuation standards.

  17. Real options theory to the pricing of allowances contract to carbon emission

    International Nuclear Information System (INIS)

    Horii, Leticia Takahashi; Parente, Virginia; Goldemberg, Jose

    2010-01-01

    The objective of this work is to develop a pricing model contract for allowances to emit carbon through Real Options. Emissions allowances are equivalent tons of carbon traded between Annex I countries from companies that have the ability to reduce their emissions beyond what is assigned to it. The surplus of emission reductions produced by these companies may be sold in the emissions market. Thus, this work can contribute to improving the management of contractual risk and enable companies estimated the price at which a contract can be signed. Properly evaluate the contracts that the market environment is a challenge for companies. The historic low of information and randomness in the price of carbon allowances in the spot market suggest extreme caution in its use. (author)

  18. Sustained Forced Sale Value Opinion Advice in Nigerian Valuation ...

    African Journals Online (AJOL)

    Sultan

    volume of secured lending by commercial banks. ... Keywords: Forced sale value, mortgage valuation, Nigeria, valuation ... fact that given the rather large set of unknowns .... Besides the primary data .... mortgage lending value add anything.

  19. Valuation of brands and intellectual capital

    OpenAIRE

    Fernández, Pablo

    2002-01-01

    In this paper we review several methods used for valuing brands. Among them, those of Interbrand, Damodaran, Financial World, Houlihan Valuation Advisors, Market Facts, Young & Rubicam and CDB Research & Consulting. In particular, we analyze in depth the valuations of Kellogg's and Coca-Cola performed by Damodaran and the method proposed by Interbrand. Damodaran valued the Coca-Cola brand at 24.6 billion dollars in 1993 and at 102.6 billion dollars in 1998. In recent years, a lot has been sai...

  20. 7 CFR 4290.503 - RBIC's adoption of an approved valuation policy.

    Science.gov (United States)

    2010-01-01

    ... close of the quarter. (e) Review of valuations by independent public accountant. (1) For valuations performed as of the end of your fiscal year, your independent public accountant must review your valuation... independent public accountant's report on your audited annual financial statements (SBA Form 468) must include...

  1. 13 CFR 107.503 - Licensee's adoption of an approved valuation policy.

    Science.gov (United States)

    2010-01-01

    ... of the quarter. (e) Review of valuations by independent public accountant. (1) For valuations performed as of the end of your fiscal year, your independent public accountant must review your valuation... independent public accountant's report on your audited annual financial statements (SBA Form 468) must include...

  2. Valuation of medical resource units collected in health economic studies.

    Science.gov (United States)

    Copley-Merriman, C; Lair, T J

    1994-01-01

    This paper reviews the issues that are critical for the valuation of medical resources in the context of health economic studies. There are several points to consider when undertaking the valuation of medical resources. The perspective of the analysis should be established before determining the valuation process. Future costs should be discounted to present values, and time and effort spent in assigning a monetary value to a medical resource should be proportional to its importance in the analysis. Prices vary considerably based on location of the service and the severity of the illness episode. Because of the wide variability in pricing data, sensitivity analysis is an important component of validation of study results. A variety of data sources have been applied to the valuation of medical resources. Several types of data are reviewed in this paper, including claims data, national survey data, administrative data, and marketing research data. Valuation of medical resources collected in clinical trials is complex because of the lack of standardization of the data sources. A national pricing data source for health economic valuation would greatly facilitate study analysis and make comparisons between results more meaningful.

  3. An Approach for Calculating Land Valuation by Using Inspire Data Models

    Science.gov (United States)

    Aydinoglu, A. C.; Bovkir, R.

    2017-11-01

    Land valuation is a highly important concept for societies and governments have always emphasis on the process especially for taxation, expropriation, market capitalization and economic activity purposes. To success an interoperable and standardised land valuation, INSPIRE data models can be very practical and effective. If data used in land valuation process produced in compliance with INSPIRE specifications, a reliable and effective land valuation process can be performed. In this study, possibility of the performing land valuation process with using the INSPIRE data models was analysed and with the help of Geographic Information Systems (GIS) a case study in Pendik was implemented. For this purpose, firstly data analysis and gathering was performed. After, different data structures were transformed according to the INSPIRE data model requirements. For each data set necessary ETL (Extract-Transform-Load) tools were produced and all data transformed according to the target data requirements. With the availability and practicability of spatial analysis tools of GIS software, land valuation calculations were performed for study area.

  4. Economic valuation of aquatic ecosystem services in developing countries

    DEFF Research Database (Denmark)

    Korsgaard, Louise; Schou, Jesper S.

    2010-01-01

    -the silent water user. A promising way of placing aquatic ecosystems on the water agenda is by economic valuation of services sustained by ecosystems. In developing countries, the livelihoods of rural people often depend directly on the provision of aquatic ecosystem services. In such situations, economic......An important challenge of integrated water resources management (IWRM) is to balance water allocation between different users. While economically and/or politically powerful users have well developed methods for quantifying and justifying their water needs, this is not the case for ecosystems...... valuation of ecosystem services becomes particularly challenging. This paper reviews recent literature on economic valuation of aquatic ecosystem services in developing countries. "Market price" is the most widespread method used for valuating marketed ecosystem services in developing countries. "Cost based...

  5. Tensor valuations and their applications in stochastic geometry and imaging

    CERN Document Server

    Kiderlen, Markus

    2017-01-01

    The purpose of this volume is to give an up-to-date introduction to tensor valuations and their applications. Starting with classical results concerning scalar-valued valuations on the families of convex bodies and convex polytopes, it proceeds to the modern theory of tensor valuations. Product and Fourier-type transforms are introduced and various integral formulae are derived. New and well-known results are presented, together with generalizations in several directions, including extensions to the non-Euclidean setting and to non-convex sets. A variety of applications of tensor valuations to models in stochastic geometry, to local stereology and to imaging are also discussed.

  6. Differences Between Individual and Societal Health State Valuations

    Science.gov (United States)

    Chapman, Benjamin P.; Franks, Peter; Duberstein, Paul R.; Jerant, Anthony

    2009-01-01

    Objective The concept of “adaptation” has been proposed to account for differences between individual and societal valuations of specific health states in patients with chronic diseases. Little is known about psychological indices of adaptational capacity, which may predict differences in individual and societal valuations of health states. We investigated whether such differences were partially explained by personality traits in chronic disease patients. Research Design Analysis of baseline data of randomized controlled trial. Subjects Three hundred seventy patients with chronic disease. Measures The NEO-five factor inventory measure of personality, EuroQoL-5D (EQ-5D) societal-based, and the EQ visual analogue scale individually-based measures of health valuation. Results Regression analyses modeled Dev, a measure of difference between the EQ-Visual Analogue Scale and EQ-5D, as a function of personality traits, sociodemographic factors, and chronic diseases. Individual valuations were significantly and clinically higher than societal valuations among patients in the second and third quartile of conscientiousness (Dev = 0.08, P = 0.01); among covariates, only depression (Dev = -0.04, P = 0.046) was also associated with Dev. Conclusion Compared with societal valuations of a given health state, persons at higher quartiles of conscientiousness report less disutility associated with poor health. The effect is roughly twice that of some estimates of minimally important clinical differences on the EQ-5D and of depression. Although useful at the aggregate level, societal preference measures may systematically undervalue the health states of more conscientious individuals. Future work should examine the impact this has on individual patient outcome evaluation in clinical studies. PMID:19543121

  7. Oceňování dlouhodobého hmotného majetku reálnou hodnotou

    Directory of Open Access Journals (Sweden)

    Martin Pernica

    2013-11-01

    Full Text Available Purpose: The purpose of the article is to discuss the valuation of assets at real value. The authors characterize the benefits of valuing assets at real value and explain the procedure for deriving the coefficient of the real price of tangible movable assets. Scientific aim: Main aim of this article is to define the specifics of the valuation of assets in the Czech financial accounting and to specify the positive and negative of the valuation of assets on a historical cost principle. Methods: Contribution use general scientific methods, especially analysis, synthesis, comparison, induction and deduction. Essential sources of information were professional publications and selected educational texts at the end of this contribution. Findings: Real value nesting take no risks burden „fast changes” depending on concrete situation in the marketplace; is sturdy against influence legislative state provisions and isn't loaded by localities changes in which happens evaluation of property. The same property will be through the real value represent the potential economic benefits for a company in a specific sector regardless in which state will the company conduct business or to set up a business and establish new branches. Valuation of fixed assets in accounting is a very complex thing. Need accurate information about the real value of asset, which as one of all of these options reflects its economic benefits for businesses; it is radical for all companies regardless of their size. Conclusions: Valuation of assets at real value creates a presumption for correct decisions about costly investments, helping companies adequately manage their costs and creates conditions for substantial savings. Firms using the valuation of tangible assets at real value have become an essential precondition for success.

  8. 19 CFR 10.18 - Valuation of assembled articles.

    Science.gov (United States)

    2010-04-01

    ... 19 Customs Duties 1 2010-04-01 2010-04-01 false Valuation of assembled articles. 10.18 Section 10... THE TREASURY ARTICLES CONDITIONALLY FREE, SUBJECT TO A REDUCED RATE, ETC. General Provisions Articles Assembled Abroad with United States Components § 10.18 Valuation of assembled articles. As in the case of...

  9. Valuation of inventories in systems with product recovery

    NARCIS (Netherlands)

    R.H. Teunter (Ruud); E.A. van der Laan (Erwin)

    2003-01-01

    textabstractValuation of inventories has different purposes, in particular accounting and decision making, and it is not necessary for a firm to use the same valuation method for both purposes. In fact, it is not uncommon to use accounting books as well as management books. In this chapter, we will

  10. Artificial Neural Networks and the Mass Appraisal of Real Estate

    Directory of Open Access Journals (Sweden)

    Gang Zhou

    2018-03-01

    Full Text Available With the rapid development of computer, artificial intelligence and big data technology, artificial neural networks have become one of the most powerful machine learning algorithms. In the practice, most of the applications of artificial neural networks use back propagation neural network and its variation. Besides the back propagation neural network, various neural networks have been developing in order to improve the performance of standard models. Though neural networks are well known method in the research of real estate, there is enormous space for future research in order to enhance their function. Some scholars combine genetic algorithm, geospatial information, support vector machine model, particle swarm optimization with artificial neural networks to appraise the real estate, which is helpful for the existing appraisal technology. The mass appraisal of real estate in this paper includes the real estate valuation in the transaction and the tax base valuation in the real estate holding. In this study we focus on the theoretical development of artificial neural networks and mass appraisal of real estate, artificial neural networks model evolution and algorithm improvement, artificial neural networks practice and application, and review the existing literature about artificial neural networks and mass appraisal of real estate. Finally, we provide some suggestions for the mass appraisal of China's real estate.

  11. Externalities of fuel cycles 'ExternE' project. Economic valuation. Economical valuation: An impact pathway approach

    International Nuclear Information System (INIS)

    Markandya, A.

    1994-01-01

    The EC/US study of the external costs of fuel cycles is designed to trace through all the environmental impacts arising from the use of a particular fuel, from the 'cradle' to the 'grave'; to quantify these impacts as far as possible (giving priority to those that are the considered the most important) and to value the damages arising from them in money terms as far as possible (again keeping to the priority listing established by the physical quantification). The fuel cycle has been identified as consisting of the following elements: activities -> emissions/burdens; emissions/burdens -> physical environmental impacts; physical impacts -> external environmental impacts; external impacts -> costs of these impacts. The activities consist of all the operations that are carried out in connection with the extraction transportation, use in electricity generation and finally disposal of the fuel. The emissions or burdens arising from the cycle result in physical impacts, which in turn imply certain environmental impacts. An illustration of a typical fuel cycle (coal) audits environmental impacts is given in Figures. The work of the fuels cycle study teams is to complete the valuation of the shaded areas but giving priority to those impacts that are likely to be quantitatively important. .Each fuel cycle is evaluated in a location-specific context, so that it refers to the impacts arising from the use of coal, or gas or whatever fuel is being considered at an actual plant that is operating. The purpose of this report on economic valuation is to: (a) examine the literature or economic valuation of environmental externalities in Europe; (b) assess its relevance to the fuel cycle study and (c) make recommendations on how the detailed analysis of the individual fuel cycles should use the economic valuation. It is important to recognize that the report is not a complete survey of all the research ever done on environmental valuation. Although as complete a survey of all the

  12. Outpatient imaging center valuations: do you need a fair-market value analysis?

    Science.gov (United States)

    Koonsman, G S

    2001-01-01

    Typically, outpatient diagnostic imaging centers are formed as partnerships between radiologists, radiologists and hospitals, and/or radiologists and diagnostic imaging center management companies. As a result of these partnership structures, the question of equity valuation frequently arises. It is not only important to understand when an independent valuation would be required, but also what "type" of valuation needs to be performed. The type of valuation may vary based upon the use of the valuation. In partnerships that involve hospitals and physicians, the federal anti-kickback statutes (fraud and abuse laws) require that all transactions between referring physicians and hospitals be consummated at fair-market value. In addition, tax-exempt hospitals that enter into partnerships with physicians are required to enter into those transactions at fair-market value or risk losing their tax-exempt status. Fair-market value is also typically the standard of value that all partnerships strive to conduct equity transactions with shareholders. Qualifications required by those who perform independent fair-market value opinions include: Proper business valuation training and focus on valuations as a primary business Focus on the healthcare industry and specifically on the valuation of diagnostic imaging centers In order to perform a reasonable business valuation analysis, the appraiser must have access to a significant amount of financial, operational and legal information. The analyst must be able to understand the history of the imaging center as well as the projected future of the center. Ultimately, a valuation is a measurement of the estimated future cash flows of the center--risk adjusted--in order to quantify the present value of those cash flows.

  13. Contingency Valuation of Croatian Arboretum Opeka

    Directory of Open Access Journals (Sweden)

    Stjepan Posavec

    2012-12-01

    Full Text Available Background and Purpose: Social aspects of forestry have always been an important factor of forest usage and management, and therefore have significant influence on its sustainability. Non-wood forest functions such as recreation, tourism, aesthetic and educational factors influence development of rural areas. Contingent valuation method has rarely been used for evaluation of protected forest areas. The aim of the article is to estimate the amount of money visitors are willing to pay for nature’s resources preservation in the arboretum Opeka in the North-West Croatia. Material and Methods: Opeka Arboretum is situated in the Vinica municipality in northern Croatia. Located in a large park surrounding a manor, Opeka arboretum, with its 65 hectares is the largest of the three arboretums existing in Croatia today. The arboretum was founded in 1860 by the Count Marko Bombelles. Contingent valuation is a survey-based economic technique for the non-market valuation of resources, such as environmental preservation or the impact of contamination. It is also the approach that can generally be used to include what is usually referred to as the passive use component of the economic value of environmental goods. Results and Conclusion: Willingness to pay for visitor’s use of the arboretum has been investigated using the survey and contingency valuation method on a sample of 53 respondents. Research results present high preference for arboretum benefits such as beauty of landscape, cultural and historical significance, recreation and health but low willingness to pay.

  14. Risk Neutral Option Pricing With Neither Dynamic Hedging nor Complete Markets

    OpenAIRE

    Nassim N. Taleb

    2014-01-01

    Proof that under simple assumptions, such as constraints of Put-Call Parity, the probability measure for the valuation of a European option has the mean derived from the forward price which can, but does not have to be the risk-neutral one, under any general probability distribution, bypassing the Black-Scholes-Merton dynamic hedging argument, and without the requirement of complete markets and other strong assumptions. We confirm that the heuristics used by traders for centuries are both mor...

  15. Evaluación socioeconómica de proyectos con el método de opciones reales

    Directory of Open Access Journals (Sweden)

    Martin Guajardo Thomas

    2008-07-01

    real options method was higher between 25 and 500%, depending of the case of study, to the traditional ones. For that reason, the approach of real options results to be a viable alternative and useful for the governmental entities in Chile that look for an optimum valuation of their projects of social investment.

  16. Valuation of ecosystem services: paradox or Pandora’s box for decision-makers?

    OpenAIRE

    Nijnik,Maria; Miller,David

    2017-01-01

    The valuation of ecosystem services (ES) employs a range of methods. Based on a literature review and selected empirical examples, we consider major opportunities and challenges in ecosystem services valuation. We analyse when different valuation methods are appropriate and most useful. We demonstrate that mechanisms to capture benefits and costs are needed; and that the use of valuation should be incorporated more widely in decision-making. However, we argue that ecosystems are complex syste...

  17. 26 CFR 25.2512-4 - Valuation of notes.

    Science.gov (United States)

    2010-04-01

    ... 26 Internal Revenue 14 2010-04-01 2010-04-01 false Valuation of notes. 25.2512-4 Section 25.2512-4... GIFT TAX; GIFTS MADE AFTER DECEMBER 31, 1954 Transfers § 25.2512-4 Valuation of notes. The fair market... the property, if any, pledged or mortgaged as security is insufficient to satisfy it. ...

  18. 48 CFR 211.274-3 - Policy for valuation.

    Science.gov (United States)

    2010-10-01

    ... 48 Federal Acquisition Regulations System 3 2010-10-01 2010-10-01 false Policy for valuation. 211... Documents 211.274-3 Policy for valuation. (a) It is DoD policy that contractors shall be required to...'s unit acquisition cost is— (1) For fixed-price type line, subline, or exhibit line items, the unit...

  19. Combining accounting approaches to practice valuation.

    Science.gov (United States)

    Schwartzben, D; Finkler, S A

    1998-06-01

    Healthcare organizations that wish to acquire physician or ambulatory care practices can choose from a variety of practice valuation approaches. Basic accounting methods assess the value of a physician practice on the basis of a historical, balance-sheet description of tangible assets. Yet these methods alone are inadequate to determine the true financial value of a practice. By using a combination of accounting approaches to practice valuation that consider factors such as fair market value, opportunity cost, and discounted cash flow over a defined time period, organizations can more accurately assess a practice's actual value.

  20. A real options evaluation model for the diffusion prospects of new renewable power generation technologies

    International Nuclear Information System (INIS)

    Kumbaroglu, Guerkan; Madlener, Reinhard; Demirel, Mustafa

    2008-01-01

    This study presents a policy planning model that integrates learning curve information on renewable power generation technologies into a dynamic programming formulation featuring real options analysis. The model recursively evaluates a set of investment alternatives on a year-by-year basis, thereby taking into account that the flexibility to delay an irreversible investment expenditure can profoundly affect the diffusion prospects of renewable power generation technologies. Price uncertainty is introduced through stochastic processes for the average wholesale price of electricity and for input fuel prices. Demand for electricity is assumed to be increasingly price-sensitive, as the electricity market deregulation proceeds, reflecting new options of consumers to react to electricity price changes (such as time-of-use pricing, unbundled electricity services, and choice of supplier). The empirical analysis is based on data for the Turkish electricity supply industry. Apart from general implications for policy-making, it provides some interesting insights about the impact of uncertainty and technical change on the diffusion of various emerging renewable energy technologies

  1. [Ecosystem services valuation of Qinghai Lake].

    Science.gov (United States)

    Jiang, Bo; Zhang, Lu; Ouyang, Zhi-yun

    2015-10-01

    Qinghai Lake is the largest inland and salt water lake in China, and provides important ecosystem services to beneficiaries. Economic valuation of wetland ecosystem services from Qinghai Lake can reveal the direct contribution of lake ecosystems to beneficiaries using economic data, which can advance the incorporation of wetland protection of Qinghai Lake into economic tradeoffs and decision analyses. In this paper, we established a final ecosystem services valuation system based on the underlying ecological mechanisms and regional socio-economic conditions. We then evaluated the eco-economic value provided by the wetlands at Qinghai Lake to beneficiaries in 2012 using the market value method, replacement cost method, zonal travel cost method, and contingent valuation method. According to the valuation result, the total economic values of the final ecosystem services provided by the wetlands at Qinghai Lake were estimated to be 6749.08 x 10(8) yuan RMB in 2012, among which the value of water storage service and climate regulation service were 4797.57 x 10(8) and 1929.34 x 10(8) yuan RMB, accounting for 71.1% and 28.6% of the total value, respectively. The economic value of the 8 final ecosystem services was ranked from greatest to lowest as: water storage service > climate regulation service > recreation and tourism service > non-use value > oxygen release service > raw material production service > carbon sequestration service > food production service. The evaluation result of this paper reflects the substantial value that the wetlands of Qinghai Lake provide to beneficiaries using monetary values, which has the potential to help increase wetland protection awareness among the public and decision-makers, and inform managers about ways to create ecological compensation incentives. The final ecosystem service evaluation system presented in this paper will offer guidance on separating intermediate services and final services, and establishing monitoring programs for

  2. 26 CFR 20.2031-4 - Valuation of notes.

    Science.gov (United States)

    2010-04-01

    ... 26 Internal Revenue 14 2010-04-01 2010-04-01 false Valuation of notes. 20.2031-4 Section 20.2031-4... ESTATE TAX; ESTATES OF DECEDENTS DYING AFTER AUGUST 16, 1954 Gross Estate § 20.2031-4 Valuation of notes... of the party or parties liable, or for other cause), and that any property pledged or mortgaged as...

  3. Quality-Attribute-Based Economic Valuation of Architectural Patterns

    National Research Council Canada - National Science Library

    Ozkaya, Ipek; Kazman, Rick; Klein, Mark

    2007-01-01

    .... This report makes the case that architectural patterns carry economic value, in part in the form of real options, providing software architects the right, but not the obligation, to take subsequent design actions...

  4. Valuation of international oil- and gas companies; Verdsetting av internasjonale olje- og gasselskaper

    Energy Technology Data Exchange (ETDEWEB)

    Osmundsen, Petter; Mohn, Klaus; Espedal, Harald; Loevaas, Kjell

    2002-07-01

    In Norway, stock exchange quotation of Statoil has led to increased interest in valuation of oil companies. This article goes through the theory of corporate valuation. Then it compares the theory with practice, where valuation largely is built on accounts-based indicators. Taking the oil companies as a case, the article describes and evaluates the valuation methods used by analysts and investment banks.

  5. The Value of a Biotechnology Start-up: Creative Destruction and Real Options Approach The Value of a Biotechnology Start-up: Creative Destruction and Real Options Approach

    Directory of Open Access Journals (Sweden)

    Cecilia Maya Ochoa

    2006-12-01

    Full Text Available The value of investments in high growth start-up firms is difficult to assess because payments are far in the future and their arrival is uncertain. Some of these firms may seem overvalued according to traditional methods, such as the Net Present Value, which fails to account for three drivers of value for highly innovative industries: intellectual capital as the engine of innovation, market power as the expectation of monopolistic power when innovating, and a growth option which may be exercised in the case of success.This paper presents a case study on a biotechnology start-up and applies the Creative Destruction – Real Options approach (CD-ROA (Maya, 2004 which takes into account all three drivers of value and is able to explain the high prices investors pay for shares of a company in this industry. It proves that such prices are not cases of overpricing but of recognition of the large growth potential of firms which are part of highly innovative industries.La valoración de la inversión en compañías nacientes de alto crecimiento no estarea fácil, pues los ingresos esperados se generan en un futuro lejano y bajo granincertidumbre. De acuerdo con métodos tradicionales de valoración como el ValorPresente Neto, el mercado parece sobrevalorar algunas de estas compañías. Ello sedebe a que estos métodos tradicionales no tienen en cuenta tres elementos esencialesque determinan el valor en estos casos: el capital intelectual como el motor de lainnovación, el poder de mercado por la expectativa de ingresos monopolísticos sise da la innovación y una opción real de crecimiento que puede ser ejercida en casode éxito.Este artículo aplica a una empresa de biotecnología el enfoque de opciones realesy destrucción creativa (Maya, 2004, el cual incluye estos tres determinantes delvalor y logra explicar el alto precio que los inversionistas pagan por una acción deeste tipo de empresas. Se demuestra que éste no es un caso de

  6. Methods of Assessing Noise Nuisance of Real Estate Surroundings

    Directory of Open Access Journals (Sweden)

    Szopińska Kinga

    2016-03-01

    Full Text Available Testing what factors create the market value of real estate is key information when preparing property valuations as well as other opinions and professional evaluations on the basis of which court verdicts or administrative decisions are made. One of the factors influencing the value of some real estate is the level of noise present in the surroundings, which can lead to the occurrence of noise nuisance negatively affecting social relations.

  7. Valuation of exotic options in the framework of Levy processes

    Energy Technology Data Exchange (ETDEWEB)

    Milev, Mariyan, E-mail: marianmilev2002@gmail.com; Georgieva, Svetla, E-mail: marianmilev2002@gmail.com; Markovska, Veneta, E-mail: marianmilev2002@gmail.com [Department of Mathematics and Physics, UFT-Plovdiv, bul. Maritza 26, 4002 Plovdiv (Bulgaria)

    2013-12-18

    In this paper we explore a straightforward procedure to price derivatives by using the Monte Carlo approach when the underlying process is a jump-diffusion. We have compared the Black-Scholes model with one of its extensions that is the Merton model. The latter model is better in capturing the market’s phenomena and is comparative to stochastic volatility models in terms of pricing accuracy. We have presented simulations of asset paths and pricing of barrier options for both Geometric Brownian motion and exponential Levy processes as it is the concrete case of the Merton model. A desired level of accuracy is obtained with simple computer operations in MATLAB for efficient computational time.

  8. A social preference valuations set for EQ-5D health states in Flanders, Belgium.

    Science.gov (United States)

    Cleemput, Irina

    2010-04-01

    This study aimed at deriving a preference valuation set for EQ-5D health states from the general Flemish public in Belgium. A EuroQol valuation instrument with 16 health states to be valued on a visual analogue scale was sent to a random sample of 2,754 adults. The initial response rate was 35%. Eventually, 548 (20%) respondents provided useable valuations for modeling. Valuations for 245 health states were modeled using a random effects model. The selection of the model was based on two criteria: health state valuations must be consistent, and the difference with the directly observed valuations must be small. A model including a value decrement if any health dimension of the EQ-5D is on the worst level was selected to construct the social health state valuation set. A comparison with health state valuations from other countries showed similarities, especially with those from New Zealand. The use of a single preference valuation set across different health economic evaluations within a country is highly preferable to increase their usability for policy makers. This study contributes to the standardization of outcome measurement in economic evaluations in Belgium.

  9. 76 FR 71491 - Gross Estate; Election to Value on Alternate Valuation Date

    Science.gov (United States)

    2011-11-18

    ... 14 may be applicable to determine fair market value for Federal estate tax purposes. (iii... valuation period shall be added to the value of the entity on the alternate valuation date. The sum of the... Gross Estate; Election to Value on Alternate Valuation Date AGENCY: Internal Revenue Service (IRS...

  10. Conceptual bases of the brand valuation by cost method

    Directory of Open Access Journals (Sweden)

    G.Y. Studinska

    2015-03-01

    Full Text Available The necessity of valuing intangible assets in accordance with international trends is substantiated. The brand is seen as more important component of intangible assets, as an effective management tool company. The benefits and uses of brand evaluation results are investigated. System monocriterion cost brand evaluation methods is analyzed. In particular, methods that require evaluation by the time factor (current and forecast methods and methods for factor comparison base (relative and absolute. The cost method of brand valuation through market transactions in accordance J.Common’s classification is considered in detail. The explanation of the difference between method a summation of all costs and method of brand valuation through market transactions is provided. The advantages and disadvantages considered cost method of brand valuation are investigated. The cost method as the relative-predicted of the brand valuation, «The method of determining the proportion of the brand from the discounted total costs» is grounded

  11. Monetary valuation in Life Cycle Assessment

    DEFF Research Database (Denmark)

    Pizzol, Massimo; Weidema, Bo Pedersen; Brandão, Miguel

    2015-01-01

    different impacts and/or with other economic costs and benefits. For this reason, monetary valuation has a great potential to be applied also in Life Cycle Assessment (LCA), especially in the weighting phase. However, several challenges limit its diffusion in the field, which resulted in only a few......Monetary valuation is the practice of converting measures of social and biophysical impacts into monetary units and is used to determine the economic value of non-market goods, i.e. goods for which no market exists. It is applied in cost benefit analysis to enable the cross-comparison between...

  12. Sustained forced sale value opinion advice in Nigerian valuation ...

    African Journals Online (AJOL)

    This study, the first in a series testing for standardisation of practice among professional Valuers, explores the issue of level of awareness of International Valuation Standards (IVS) provisions among Nigerian Valuers. This is with respect to mortgage valuations in the face of increased volume of secured lending by ...

  13. Évaluation des télécentres communautaires

    International Development Research Centre (IDRC) Digital Library (Canada)

    La plupart des études d'évaluation auront pour objectif de mesurer les .... Les télécentres peuvent faire du contrôle régulier une de leurs tâches de gestion ...... Planning, monitoring and évaluation of programme performance: a resource book.

  14. EFFECT OF REVENUE INSURANCE ON ENTRY AND EXIT DECISIONS IN TABLE GRAPE PRODUCTION: A REAL OPTION APPROACH

    OpenAIRE

    Seo, Sangtaek; Salin, Victoria; Mitchell, Paul D.; Leatham, David J.

    2004-01-01

    This study determines the entry and exit thresholds of table grape farming with irreversible investment under uncertainty. Real option approach is adopted to consider the investment and management flexibility. Also revenue insurance is introduced to consider the effect of the risk management programs on the entry and exit thresholds. Results show that revenue insurance increases the entry and exit thresholds by 1% and 4%, respectively, thus discouraging new investment and current farming, as ...

  15. Models for S&P500 Dynamics: Evidence from Realized Volatility, Daily Returns, and Option Prices

    DEFF Research Database (Denmark)

    Christoffersen, Peter; Jacobs, Kris; Mimouni, Karim

    in the search for alternative specifications. We then estimate the models using maximum likelihood on S&P500 returns. Finally, we employ nonlinear least squares on a panel of option data. In comparison with earlier studies that explicitly solve the filtering problem, we analyze a more comprehensive option data......Most recent empirical option valuation studies build on the affine square root (SQR) stochastic volatility model. The SQR model is a convenient choice, because it yields closed-form solutions for option prices. However, relatively little is known about the resulting biases. We investigate...... alternatives to the SQR model, by comparing its empirical performance with that of five different but equally parsimonious stochastic volatility models. We provide empirical evidence from three different sources. We first use realized volatilities to assess the properties of the SQR model and to guide us...

  16. Implied adjusted volatility functions: Empirical evidence from Australian index option market

    Science.gov (United States)

    Harun, Hanani Farhah; Hafizah, Mimi

    2015-02-01

    This study aims to investigate the implied adjusted volatility functions using the different Leland option pricing models and to assess whether the use of the specified implied adjusted volatility function can lead to an improvement in option valuation accuracy. The implied adjusted volatility is investigated in the context of Standard and Poor/Australian Stock Exchange (S&P/ASX) 200 index options over the course of 2001-2010, which covers the global financial crisis in the mid-2007 until the end of 2008. Both in- and out-of-sample resulted in approximately similar pricing error along the different Leland models. Results indicate that symmetric and asymmetric models of both moneyness ratio and logarithmic transformation of moneyness provide the overall best result in both during and post-crisis periods. We find that in the different period of interval (pre-, during and post-crisis) is subject to a different implied adjusted volatility function which best explains the index options. Hence, it is tremendously important to identify the intervals beforehand in investigating the implied adjusted volatility function.

  17. The valuation of franchises : a restaurant case study / Gavin Stanvliet

    OpenAIRE

    Stanvliet, Gavin Dennis

    2012-01-01

    The objective of a business valuation arrangement is to reach a reasonable and acceptable opinion of value. Valuing a business entity has become less of a guessing game than before. Business valuations are two thirds science and one third art according to several theorists and practitioners. The result of a valuation is only definite if it can accurately predict the future, and given that it is not possible, there will always be an element of risk that the actual value differs from the expect...

  18. Quantitative valuation of platform technology based intangibles companies

    OpenAIRE

    Achleitner, Ann-Kristin; Nathusius, Eva; Schraml, Stephanie

    2007-01-01

    In the course of raising external equity, e.g. from venture capitalists, a quantitative valuation is usually required for entrepreneurial ventures. This paper examines the challenges of quantitatively valuing platform technology based entrepreneurial ventures. The distinct characteristics of such companies pose specific requirements on the applicability of quantitative valuation methods. The entrepreneur can choose from a wide range of potential commercialization strategies to pursue in the c...

  19. A real options-based CCS investment evaluation model: Case study of China's power generation sector

    International Nuclear Information System (INIS)

    Zhu, Lei; Fan, Ying

    2011-01-01

    Highlights: → This paper establishes a carbon captures and storage (CCS) investment evaluation model. → The model is based on real options theory and solved by the Least Squares Monte Carlo (LSM) method. → China is taken as a case study to evaluate the effects of regulations on CCS investment. → The findings show that the current investment risk of CCS is high, climate policy having the greatest impact on CCS development. -- Abstract: This paper establishes a carbon capture and storage (CCS) investment evaluation model based on real options theory considering uncertainties from the existing thermal power generating cost, carbon price, thermal power with CCS generating cost, and investment in CCS technology deployment. The model aims to evaluate the value of the cost saving effect and amount of CO 2 emission reduction through investing in newly-built thermal power with CCS technology to replace existing thermal power in a given period from the perspective of power generation enterprises. The model is solved by the Least Squares Monte Carlo (LSM) method. Since the model could be used as a policy analysis tool, China is taken as a case study to evaluate the effects of regulations on CCS investment through scenario analysis. The findings show that the current investment risk of CCS is high, climate policy having the greatest impact on CCS development. Thus, there is an important trade off for policy makers between reducing greenhouse gas emissions and protecting the interests of power generation enterprises. The research presented would be useful for CCS technology evaluation and related policy-making.

  20. L’évaluation des experts dans les organisations

    Directory of Open Access Journals (Sweden)

    Pierre Mirralès

    2009-03-01

    Full Text Available L’avènement des nouvelles technologies et le développement de la société de connaissance n’ont fait qu’amplifier le rôle central de l’expert dans l’organisation. Plus que tout autre individu évoluant dans un milieu professionnel, son évaluation s’avère incontournable et cruciale. Du point de vue managérial pourtant, cette nécessaire évaluation génère très souvent de nombreuses frustrations de l’ensemble des parties prenantes. Notre travail de recherche s’attache à comprendre et à apporter des éléments de réponse à une évaluation des experts qui soit acceptable par eux –mêmes, par les dirigeants de l’organisation et par les autres parties prenantes (Etat, clients, actionnaires, fournisseurs…. Il met en évidence deux grandes modalités de l’évaluation : l’évaluation contrôle et l’évaluation régulation, pour lesquelles les réactions des experts sont diamétralement opposées. Notre méthodologie de recherche utilise des études de cas entreprises auprès d’une trentaine d’experts de deux secteurs d’activité différents.The advent of new technologies and the development of the Knowledge society have increased the central role of experts in organizations. More than any other professional individual, his evaluation is crucial. From the managerial point of view however, this evaluation often creates frustration of many stakeholders. This article tries to understand the process and develop a method which is acceptable to the management of the organization but also for other stakeholders (State, clients, shareholders, suppliers…. The article highlights two methods of evaluation: the control and regulation methods, for which the reactions of the experts are completely opposed. The methodology is based on case studies of firms with some 30 experts in two sectors of activity.

  1. The Pricing of Traffic Light Options and other Correlation Derivatives

    DEFF Research Database (Denmark)

    Kokholm, Thomas

    This paper considers the valuation of European style derivatives with payoffs depending on both a stock index and underlying LIBOR rates. The model has the attractive feature that it is based on observable market quantities which makes it very easy to calibrate. A closed form solution is derived...... for the price of the correlation derivative known as the traffic light option under lognormality assumptions for the underlying processes. A pricing approach for more general payoffs is presented, and an illustration is performed with Monte Carlo simulation by the pricing of a specific hybrid derivative...

  2. MEASURING INSOLVENCY: VALUATION GUIDELINES FOR ROMANIAN COMPANIES

    Directory of Open Access Journals (Sweden)

    Tudor Andrei RĂDULESCU

    2014-11-01

    Full Text Available Nowadays valuation has become an inherent part of business environment which has experienced dynamic changes in economic activity through mergers and acquisitions, organizational restructuring and repurchasing of shares. The dynamic centre of all these activities is valuation, whose methods are needed not only for accounting purposes, but to serve as information support to all stakeholders. Although there are many individual techniques of assessment businesses in difficulty, selecting the most suitable method of valuation is often difficult. The paper is a mini-guide that should be taken into account by all actors involved in the assessment of firms in difficulty when they pursue to carry out such activities. In this regard, we compare the financial and accounting aspects with the national regulation on insolvency, highlighting the usefulness or, where appropriate, the lack of consistency based on assessments completed to date. In the end we insist on the reconciliation of financial vision with the rule of law in order to simplify insolvency proceedings in Romania.

  3. Phase Two Protected Species Valuation

    Data.gov (United States)

    National Oceanic and Atmospheric Administration, Department of Commerce — Nonmarket valuation research has produced economic value estimates for a variety of threatened, endangered, and rare species around the world. Although over 40 value...

  4. Phase One Protected Species Valuation

    Data.gov (United States)

    National Oceanic and Atmospheric Administration, Department of Commerce — Nonmarket valuation research has produced economic value estimates for a variety of threatened, endangered, and rare species around the world. Although over 40 value...

  5. Development of a computer model (REASON) for the simulation of behavioural decisions on the basis of inference and valuation processes

    International Nuclear Information System (INIS)

    Engemann, A.; Radtke, M.; Sachs, S.

    1981-07-01

    A computer model for the simulation of behavioural decisions and the preceding inference and valuation processes is under development under the sponsorship of the 'Stiftung Volkswagenwerk'. The present paper describes the basic ideas of the model from both the psychological and the mathematical point of view. The interdisciplinary character of the project is demonstrated quite clearly. In a semantic network, which contains knowlege, values and standarts related to the field under consideration, feasible actions and their consequences are evaluated. According to the behavioural model of Ajzen and Fishbein, valuations of the consequences are multiplied with the expections and added up. The command language for the program allows and algebraic definition of the Fishbein formula. The concept, consisting of object structres, predicates and implications, can be described in nearly natural language. In addition to this 'expected utility model' the program provides the possibility to exclude option by thresholds for the simulation of simplistic heuristics. (orig.) [de

  6. Monetary ecosystem services valuation in natural environment management

    OpenAIRE

    Álvarez, David

    2017-01-01

    As it happened with Stern Report, which made international community change their attitude related to climate change, TEEB (The Economics of Ecosystem Services and Biodiversity) was a turning point in valuing biodiversity and ecosystem services. This change of attitude happened, partially, thanks to include monetary ecosystem valuation of ecosystem services and how much their conservation and avoid their loss worth to the entire society. Integrate monetary valuation in green infrastructur...

  7. Timing effects in health valuations.

    Science.gov (United States)

    Leiter, Andrea M; Pruckner, Gerald J

    2014-06-01

    This paper analyzes the impact of external sources of information, conveyed by the frequency of risky events that vary across time, on the individual willingness to pay (WTP) for a reduction of mortality risk. We collected data from a contingent valuation (CV) exercise conducted in two waves (fall and winter) to examine whether individual WTP varied across periods that differed in the predominance of fatal accidents. Risk valuations were based on fatal snow avalanche accidents, that is, a type of risk with seasonal differences in occurrence. We found slightly lower but statistically significant mean WTP figures in the winter than in the fall sample because of time-varying individual risk attitudes and, therefore, recommend controlling for these factors in risk assessment CV surveys. Copyright © 2013 John Wiley & Sons, Ltd.

  8. Classe de langue et compétence évaluative des enseignants : entre pratiques évaluatives et politique éducative

    Directory of Open Access Journals (Sweden)

    Mina Sadiqui

    2014-12-01

    Dans une dernière partie nous esquisserons, en nous basant sur une approche didactique, quelques repères qui permettraient à tout enseignant ou futur enseignant de repenser les éléments organisateurs d’un dispositif d’évaluation ,et donc de construire une compétence évaluative en classe de langue, si on veut vraiment mettre en place une nouvelle politique éducative relative à l’enseignement/apprentissage des langues ,en l’occurrence celle du FLE au lycée au Maroc.

  9. Integrated Portfolio Analysis: Return on Investment and Real Options Analysis of Intelligence Information Systems (Cryptologic Carry On Program)

    Science.gov (United States)

    2006-09-30

    14 IV. Proof-of-Concept: USS Readiness Case Study 16 A. Background 17 B. Applying KVA Methodology 19 C. KVA Results 20 D. Real Options Analysis 23...technology assets. • Quantifying intangible human capital assets (i.e., training, skills, knowledge). The average large company spends the equivalent of...Portfolios/Motorola, Unilever • IT Infrastructure/Credit Suisse • Electricity/Peaker-Plants • Acquisitions/Seagate • Contracts/Syngenta, GM Although

  10. Conservatism in Corporate Valuation

    DEFF Research Database (Denmark)

    Bach, Christian

    Using a CCAPM based risk adjustment model, consistent with general asset pricing theory, I perform corporate valuations of a large sample of stocks listed on NYSE, AMEX and NASDAQ. The model is different from the standard CAPM model in the sense that it discounts forecasted residual income for ri...

  11. Commercial real estate development and valuation in the Netherlands

    NARCIS (Netherlands)

    Schoenmaker, Dennis Albert Jan

    2016-01-01

    In the past three decades, financial deregulation, or the process of removing governmental rules controlling the way that financial organizations operate, has facilitated interconnections between commercial real estate markets, the financial sector and national economic markets. As a result,

  12. Spécialiste de programme principal, Évaluation (h/f) | CRDI - Centre ...

    International Development Research Centre (IDRC) Digital Library (Canada)

    Il recommande les méthodes, outils et processus d'évaluation et d'autoévaluation appropriés et en facilite la conception et l'utilisation par le personnel et la direction des programmes afin d'appuyer leur utilisation de l'évaluation pour éclairer la conception de projets et de programmes, améliorer les pratiques de gestion, ...

  13. Does Accrual Management Impair the Performance of Earnings-Based Valuation Models?

    OpenAIRE

    Lucie Courteau; Jennifer L. Kao; Yao Tian

    2013-01-01

    This study examines empirically how the presence of accrual management may affect firm valuation. We compare the performance of earnings-based and non-earnings-based valuation models, represented by Residual Income Model (RIM) and Discounted Cash Flow (DCF), respectively, based on the absolute percentage pricing and valuation errors for two subsets of US firms: “Suspect” firms that are likely to have engaged in accrual management and “Normal” firms matched on industry, year and size. Results ...

  14. Growth Opportunities, Earnings Permanence and the Valuation of Free Cash Flow

    Directory of Open Access Journals (Sweden)

    Ahsan Habib

    2011-12-01

    Full Text Available This paper examines empirically the effect of firm growth opportunities and earnings quality on the market valuation of free cash flow, defined as the difference between operating cash flows and capital expenditures. Equity valuation theory prescribes that free cash flow should not be associated with stock returns because itdoes not add value. However, free cash flow could become a value-relevant construct in certain contexts. This study considers growth opportunities and transitory earnings as two such contexts and examines the valuation of free cash flow. An accounting-based valuation framework is developed where stock returns are regressed onfree cash flow interacted with growth and earnings quality proxies, after controlling for book values, dividends, and current earnings realisations. Findings reveal that firms with a positive free cash flow and attractive growth opportunities command a valuation premium. Furthermore, free cash flow is found to be positively associatedwith stock returns when earnings are transitory. The results are robust to alternative definitions of both free cash flow and growth opportunities.

  15. A note on envy-free cake cutting with polynomial valuations

    DEFF Research Database (Denmark)

    Branzei, Simina

    2015-01-01

    number of players. The only existing finite envy-free cake cutting protocol for any number of players, designed by Brams and Taylor [4], has the property that its runtime can be made arbitrarily large by setting up the valuation functions of the players appropriately. Moreover, there is no closed formula...... that relates the valuation functions to the number of queries required by the protocol. In this note we show that when the valuations can be represented as polynomial functions, there exists a protocol in the standard query model that is much simpler conceptually and has a runtime bound depending...

  16. An Analytically Tractable Model for Pricing Multiasset Options with Correlated Jump-Diffusion Equity Processes and a Two-Factor Stochastic Yield Curve

    Directory of Open Access Journals (Sweden)

    Tristan Guillaume

    2016-01-01

    Full Text Available This paper shows how to value multiasset options analytically in a modeling framework that combines both continuous and discontinuous variations in the underlying equity or foreign exchange processes and a stochastic, two-factor yield curve. All correlations are taken into account, between the factors driving the yield curve, between fixed income and equity as asset classes, and between the individual equity assets themselves. The valuation method is applied to three of the most popular two-asset options.

  17. Valuation of active blind spot detection systems by younger and older adults.

    Science.gov (United States)

    Souders, Dustin J; Best, Ryan; Charness, Neil

    2017-09-01

    Due to their disproportional representation in fatal crashes, younger and older drivers both stand to benefit from in-vehicle safety technologies, yet little is known about how they value such technologies, or their willingness to adopt them. The current study investigated older (aged 65 and greater; N=49) and younger (ages 18-23; N=40) adults' valuation of a blind spot monitor and asked if self-reported visual difficulties while driving predicted the amount participants were willing to pay for a particular system (BMW's Active Blind Spot Detection System) that was demonstrated using a short video. Large and small anchor values ($250 and $500, respectively) were used as between subjects manipulations to examine the effects of initial valuation, and participants proceeded through a short staircase procedure that offered them either the free installation of the system on their current vehicle or a monetary prize ($25-$950) that changed in value according to which option they had selected in the previous step of the staircase procedure. Willingness to use other advanced driver assistance systems (lane-departure warning, automatic lane centering, emergency braking, adaptive cruise control, and self-parking systems) was also analyzed, additionally controlling for prior familiarity of those systems. Results showed that increased age was associated with a higher valuation for the Active Blind Spot Detection System in both the large and small anchor value conditions controlling for income, gender, and technology self-efficacy. Older adults valued blind spot detection about twice as much ($762) as younger adults ($383) in the large anchor condition, though both groups' values were in the range for the current cost of an aftermarket system. Similarly, age was the most robust positive predictor of willingness to adopt other driving technologies, along with system familiarity. Difficulties with driving-related visual factors also positively predicting acceptance levels for

  18. ASPECTS OF THE STOCK VALUATION AND ACCOUNTING IN AGRICULTURAL UNITS IN ROMANIA

    Directory of Open Access Journals (Sweden)

    Mariana BANUTA

    2014-11-01

    Full Text Available This paper approaches a current and common and topical problem of the business entities operating in agriculture, the stock valuation and accounting problem. Thus, gradually the article starts from the delimitation of the categories of inventories in agriculture, continues with the reasons for the need to valuate them and shows the stock valuation methods in the current accounting and in other specific situations.

  19. Big Data in Real Estate? From Manual Appraisal to Automated Valuation

    NARCIS (Netherlands)

    Kok, Nils; Koponen, Eija-Leena; Martínez-Barbosa, Carmen

    2017-01-01

    Real estate is the third-largest asset class for institutional investors, but determining the value of commercial real estate assets remains elusively hard. In this article, the authors provide a practical application of big data by employing a unique set of data on U.S. multifamily assets, in

  20. Economic Valuation of Contamination Risks and its Effect on Site Investigations

    International Nuclear Information System (INIS)

    Back, Paer-Erik; Rosen, Lars

    2006-01-01

    Risk management is an important part of contaminated land projects and different types of risks must be considered both during investigation and remediation phases, e.g. human health risks, ecological risks, risks for workers during remediation, and project risks. The latter can be risks associated with e.g. time delays due to technical or juridical problems, or failure of remediation techniques. To provide cost-efficient management of remediation projects, there is an incentive for economic valuation of the risk reduction provided by further investigation or remedial actions. The purpose of this paper is (1) to describe problems and possibilities with economic valuation of risk reductions, and (2) to illustrate how different valuation perspectives affect the extent of investigations. A decision analysis model is presented for integrating the valuation of health, ecological, and project risks

  1. Economic Valuation of Contamination Risks and its Effect on Site Investigations

    Energy Technology Data Exchange (ETDEWEB)

    Back, Paer-Erik; Rosen, Lars [Chalmers Univ. of Technology, Goeteborg (Sweden). Dept. of Civil Engineering

    2006-09-15

    Risk management is an important part of contaminated land projects and different types of risks must be considered both during investigation and remediation phases, e.g. human health risks, ecological risks, risks for workers during remediation, and project risks. The latter can be risks associated with e.g. time delays due to technical or juridical problems, or failure of remediation techniques. To provide cost-efficient management of remediation projects, there is an incentive for economic valuation of the risk reduction provided by further investigation or remedial actions. The purpose of this paper is (1) to describe problems and possibilities with economic valuation of risk reductions, and (2) to illustrate how different valuation perspectives affect the extent of investigations. A decision analysis model is presented for integrating the valuation of health, ecological, and project risks.

  2. A Formal Valuation Framework for Emotions and Their Control.

    Science.gov (United States)

    Huys, Quentin J M; Renz, Daniel

    2017-09-15

    Computational psychiatry aims to apply mathematical and computational techniques to help improve psychiatric care. To achieve this, the phenomena under scrutiny should be within the scope of formal methods. As emotions play an important role across many psychiatric disorders, such computational methods must encompass emotions. Here, we consider formal valuation accounts of emotions. We focus on the fact that the flexibility of emotional responses and the nature of appraisals suggest the need for a model-based valuation framework for emotions. However, resource limitations make plain model-based valuation impossible and require metareasoning strategies to apportion cognitive resources adaptively. We argue that emotions may implement such metareasoning approximations by restricting the range of behaviors and states considered. We consider the processes that guide the deployment of the approximations, discerning between innate, model-free, heuristic, and model-based controllers. A formal valuation and metareasoning framework may thus provide a principled approach to examining emotions. Copyright © 2017 Society of Biological Psychiatry. Published by Elsevier Inc. All rights reserved.

  3. Spring cleaning: rural water impacts, valuation, and property rights institutions.

    Science.gov (United States)

    Kremer, Michael; Leino, Jessica; Miguel, Edward; Zwane, Alix Peterson

    2011-01-01

    Using a randomized evaluation in Kenya, we measure health impacts of spring protection, an investment that improves source water quality. We also estimate households' valuation of spring protection and simulate the welfare impacts of alternatives to the current system of common property rights in water, which limits incentives for private investment. Spring infrastructure investments reduce fecal contamination by 66%, but household water quality improves less, due to recontamination. Child diarrhea falls by one quarter. Travel-cost based revealed preference estimates of households' valuations are much smaller than both stated preference valuations and health planners' valuations, and are consistent with models in which the demand for health is highly income elastic. We estimate that private property norms would generate little additional investment while imposing large static costs due to above-marginal-cost pricing, private property would function better at higher income levels or under water scarcity, and alternative institutions could yield Pareto improvements.

  4. Valuation of international oil companies - size matters

    International Nuclear Information System (INIS)

    Mohn, Klaus

    2005-01-01

    According to economic theory, exploration and the development of new oil and gas fields should respond positively to increasing prices. But since the late 1990s, financial analysts have focused strongly on short-term accounting return measures, like RoACE (Return on Average Capital Employed), for benchmarking and valuation of international oil and gas companies. Consequently, the demands for strict capital discipline among oil and gas companies may have reduced their willingness to invest for future reserves and production growth. We investigate the presumed positive relation between RoACE and stock market valuation. Based on panel data for 12 international oil and gas companies for the period 1997-2002, we seek to establish econometric relations between market valuation on one hand, and simple financial and operational indicators on the other. Our findings do not support the perceived positive relation between reported RoACE and market-based multiples. Recent evidence also suggests that the stock market is increasingly concerned about reserve replacement and sustained profitable production growth. The current high-price, low-investment equilibrium is therefore hardly stable. (Author)

  5. A real-life example of choosing an inherently safer process option

    International Nuclear Information System (INIS)

    Study, Karen

    2007-01-01

    While choosing an inherently safer alternative may seem straightforward, sometimes what seems to be the most obvious alternative may not provide the best risk reduction. The process designer must maintain a broad perspective to be able to recognize all potential hazards when evaluating design options. All aspects of operation such as start-up, shut-down, utility failure, as well as normal operation should be considered. Choosing the inherently safer option is best accomplished early in the option selection phase of a project; however, recycle back to the option selection phase may be needed if an option is not thoroughly evaluated early in the process. In this paper, a project to supply ammonia to a catalytic reactor will be reviewed. During the course of the project, an 'inherently safer' alternative was selected and later discarded due to issues uncovered during the detail design phase. The final option chosen will be compared to (1) the original design and (2) the initial 'inherently safer' alternative. The final option was inherently safer than both the original design and the initial 'inherently safer' alternative even though the design team initially believed that it would not be

  6. Relative valuation of alternative methods of tax avoidance

    OpenAIRE

    Inger, Kerry Katharine

    2012-01-01

    This paper examines the relative valuation of alternative methods of tax avoidance. Prior studies find that firm value is positively associated with overall measures of tax avoidance; I extend this research by providing evidence that investors distinguish between methods of tax reduction in their valuation of tax avoidance. The impact of tax avoidance on firm value is a function of tax risk, permanence of tax savings, tax planning costs, implicit taxes and contrasts in disclosures of tax re...

  7. Analysis of Interbrand, BrandZ and BAV brand valuation methodologies

    Directory of Open Access Journals (Sweden)

    Krstić Bojan

    2011-01-01

    Full Text Available Brand valuation is considered for one of the most significant challenges of not only theory and practice of contemporary marketing, but other disciplines, as well. Namely, the complex nature of this issue implies the need for multidisciplinary approach and creation of methodology which goes beyond the borders of marketing as a discipline, and includes knowledge derived from accounting, finance and other areas. However, mostly one-sided approaches oriented towards determining brand value either based on research results of consumer behavior and attitudes or based on financial success of the brand are dominant in marketing and financial literature. Simultaneously with these theoretical methodologies, agencies for consultancy and marketing and other subjects have been developing their own brand valuation methods and models. Some of them can be appointed to comprehensive approach to brand valuation, which overcomes mentioned problem considering one-sided analysis of brand value. The comprehensive approach, namely, presumes brand valuation based on benefits which brand provides to both customers and enterprise that owns it, in other words - based on qualitative and quantitative measures respectively reflecting behavior and attitudes of consumers and assumed financial value of the brand, or, more precisely, brand value capitalization. According to the defined research subject, this paper is structured as follows: importance and problem of brand value are reviewed in the Introduction, and three most well-known brand valuation methodologies developed by consultancy agencies - Interbrand methodology and BrandZ and BAV models are analyzed in the next section. In the further considerations the results of comparative analysis of these methodologies are presented and implications for adequate brand valuation suggested.

  8. Investment analysis in hydraulic energy generation by using the real options theory; Analise de investimentos em geracao hidraulica utilizando a teoria de opcoes reais

    Energy Technology Data Exchange (ETDEWEB)

    Noronha, J.C. Caminha; Lima, J.W. Marangon [Universidade Federal de Itajuba (UNIFEI), MG (Brazil)]. E-mails: juliaccn@unifei.edu.br; marangon@unifei.edu.br; Ferreira, T.G. Leite [Associacao Brasileira dos Investidores em Autoproducao de Energia Eletrica (ABIAPE), Brasilia, DF (Brazil)]. E-mail: tiago@abiape.com.br

    2006-07-01

    This paper presents a methodology of investment analysis in power plants using the Real Option Theory. Particularly, the investment opportunity of a hydro plant is valued based on the energy that will be traded at the new energy auction using the Brazilian Development Bank - BNDES financing program for the Generation of electric energy (new energy). Since this kind of project involves a multistage investment consisting of design, construction and operation phases, it can be treated as a sequential compound option. A binomial approach was elaborated to model this investment opportunity analysis. This approach models the uncertainties in setting up the cash flow for the investments and incorporates some possible managerial flexibility associated with the decision taken along the investment forecast. The proposed methodology will be described in parallel with an example of a real hydro-plant in which we incorporated the flexibilities regarding the decision to invest in each step of the project and an build phase abandon option, representing the transfer of concession rights after the auction. (author)

  9. Benefit-based tree valuation

    Science.gov (United States)

    E.G. McPherson

    2007-01-01

    Benefit-based tree valuation provides alternative estimates of the fair and reasonable value of trees while illustrating the relative contribution of different benefit types. This study compared estimates of tree value obtained using cost- and benefit-based approaches. The cost-based approach used the Council of Landscape and Tree Appraisers trunk formula method, and...

  10. 29 CFR 4281.16 - Benefit valuation methods-plans closing out.

    Science.gov (United States)

    2010-07-01

    ..., as determined under this subpart. (b) Valuation rule. The present value of nonforfeitable benefits... 4281(b) of ERISA, the plan sponsor shall value the plan's benefits in accordance with paragraph (b) of... 29 Labor 9 2010-07-01 2010-07-01 false Benefit valuation methods-plans closing out. 4281.16...

  11. Impact of the european emission trading scheme for the air transportation industry on the valuation of aircraft purchase rights; Impacto de la ley de comercio europeo de emisiones de CO{sub 2} para el sector del transporte aereo en la valoracion de los derechos de compra de aviones

    Energy Technology Data Exchange (ETDEWEB)

    Tarradellas-Espuny, J.; Salamero-Salas, A.; Martinez-Costa, C.

    2009-07-01

    The European Commission issued a legislative proposal in December 2006, suggesting a cap on CO{sub 2} emissions for all planes arriving or departing from EU airports, while allowing airlines to buy and sell pollution credits on the EU carbon market (Emission Trading Scheme, or ETS). In 2008 the new scheme got the final approval. Real options appear to be ab appropriate methodology to capture the extra value brought by the new legislation on new airplane purchase rights: The airline will surely have the purchase right to the new plane if the operation of the plane generates unused pollution credits that the airline can sell at a minimum price in the carbon market. This paper tries to determine if the impact of ETS in the valuation of aircraft purchase rights is significant enough in monetary terms to include the new legislation in a complex real-option model already proposed by the authors recently. The research concludes that even the impact of ETS justifies its inclusion in the model, the quality of the available sets of historical data still raises some questions. Particularly, the assumption of market efficiency for the Carbon Pool over the recent years needs to be treated with caution. (Author) 9 refs.

  12. Estimation the recreational value of Najvan park of Isfahan using a contingent valuation method

    Directory of Open Access Journals (Sweden)

    M Sameti

    2012-06-01

    Full Text Available Determining the real value of natural ecosystems, due to their significant function and ecosystem services and necessity of the best management for make use of them, has a great importance. Recently, natural resource economists have studied ecosystem value of natural resources and its role in human welfare. These studies have made a considerable progress in valuation of environmental as well as ecological services that an ecosystem can offer. Therefore this study tries to determine recreational value of Najvan Park and measure of individual’s willingness to pay (WTP based on contingent valuation method (CVM and dichotomous choices (DC. Logit model was used for measuring of individual WTP. The model parameters were estimated based on the maximum likelihood (ML method. Moreover, the marginal effects of the changes in involved variables in considered model were determined using by factor for calculating of marginal effects. The results showed that individual preservation WTP in Najvan Park is directly related to income and education while it is negatively related tobid, age and the number of family member. The calculation of the expectancy of WTP using logit model led to 8,983 Rials monthly WTP per person.

  13. [Health valuations for patients with chronic ischemic heart disease].

    Science.gov (United States)

    Meder, M; Farin, E

    2011-08-01

    The study deals with the question of how patients with chronic ischemic heart disease assess different health situations that can be achieved by rehabilitation. Furthermore it examines which factors influence these health valuations and whether the predictors vary depending on the level of education. The health valuations of n = 331 patients with chronic ischemic heart disease are compiled using visual analogue scales (VAS). In addition to sociodemographic questions, generic and illness-specific scales (SF-12, MacNew) for the health-related quality of life (HRQOL) are used as potential predictors of the health valuations. Additional basic medical data were provided by the physician. Hierarchical regression analyses are conducted; the sociodemographic, medical and HRQOL variables are included stepwise. Since many variables are observed for the regression models, an imputation of missing values is made. The health dimensions "Self-care and domestic life" and "Mobility" are assigned the highest values on the VAS. The lowest preference is assigned to the dimensions "Reduction of symptoms" and "Information about the disease". The differences between the health dimensions are statistically significant. Sociodemographic variables explain up to 3.6% of the variance of health valuations, with level of education and living with a partner being the most important predictors. The medical variables included in the second step explain between 2.1 and 6.8% incremental variance; the most important predictor is the operation performed prior to rehabilitation (bypass, heart valve). The HRQOL variables in the third block provide 7.1-24.9% incremental explanation of variance, by far the highest percentage. This is mainly achieved using the 3 MacNew scales (emotional, social and physical functioning). The overall explanation of variance for the health valuations is 17.1-28.8%. For patients with a higher level of education, the total explanation of variance is about 9.2% higher on

  14. Impact of Owner-Occupied Property Valuation by Historical Cost on Fixed Assets Value at Bankruptcy Risk

    Directory of Open Access Journals (Sweden)

    Kinga Bauer

    2015-06-01

    Full Text Available Purpose: The purpose of this article is to present the findings of the author’s own studies on the influence of owner-occupied property valuation by historical cost on fixed assets value of entities at risk of bankruptcy. Methodology: As part of the implementation of the study, objective desk research was carried out. Empirical research was carried out on a group of 100 companies on which the courts had declared bankruptcy. The study sample constituted 14% of all bankruptcy cases in 2011 and was a significant representation of the national phenomenon. Findings: The findings indicated that historical cost values of owner-occupied properties in most cases are significantly lower that estimated fair value when business activities continuation is threatened. The historical cost valuation also does not provide useful information about the market value of property, plant and equipment of entities at risk of bankruptcy that do not possess real estate. Research limitations/implications: Information about market value of fixed assets of entities at risk of bankruptcy is essential in making the decision to begin bankruptcy roceedings and estimating the ability to repay debts to creditors. Originality/value: The results are a part of the author’s own study concerning assets valuation when business activities continuation is threatened. The results emphasize the role of fair value estimation of property, plant and equipment when an entity is at risk of bankruptcy.

  15. Valuation of Embalse Nuclear Power Plant and of heavy water

    International Nuclear Information System (INIS)

    Martin, D.E.

    2008-01-01

    The author describes the Nuclear Power Plant characteristics, the building work, the heavy water valuation criteria and the reasons why he considers that any capital good can be valuated by means of cash-flow. The value of replacement of Embalse Nuclear Power Plant is of U$S 1.593.538.000 (authors) [es

  16. Interactive valuation : the social construction of the value of ecological services

    NARCIS (Netherlands)

    Jiggins, J.; Röling, N.

    1999-01-01

    Two different perspectives mark the discourse about the valuation of ecological services: (i) a positivist-realist perspective, and (ii) a constructivist perspective. The implications of the constructivist perspective for valuation are presented. First, is analyzed the current dominant practice of

  17. Measuring the Wealth of School Districts for the Apportionment of Aid to Public Schools in New York State: Full Valuation vs. Personal Income.

    Science.gov (United States)

    New York State Div. of the Budget, Albany.

    The purpose of this study was to assess the merit of using personal income in the determination of a school district's fiscal capacity for the apportionment of New York state aid. Both personal income and full valuation of real property suffer from technical weaknesses, but improvements in the data are possible if the state is willing to…

  18. CASE STUDIES ON THE ASSESSMENT OF A REAL ESTATE IN TOURISM BY APPLYING THE 2017 PROPERTY VALUATION STANDARDS AS COMPARED TO 2016 GOODS VALUATION STANDARDS

    Directory of Open Access Journals (Sweden)

    ENEA CONSTANTIN

    2017-12-01

    Full Text Available By means of evaluation, in the Romanian legislation, is the value estimation activity, materialized in a document, called an evaluation report, carried out in accordance with the standards specific to this activity and with professional ethics, by an authorized evaluator. By law, the competent authority to organize, coordinate and authorize the evaluation activity in Romania is the National Association of Authorized Assessors in Romania (ANEVAR or the Association, as an autonomous legal entity, Authorized evaluators are part of it. Due to the dynamic nature of the profession of assessor, the Romanian legislation and other professions with an impact on evaluation, evaluation standards require periodic review. The Standards Collection, 2017, is called the 2017 Property Valuation Standards and will enter into force on May 1, 2017. The structure of the standards of the previous edition has been retained in this edition.

  19. Social equality in the number of choice options is represented in the ventromedial prefrontal cortex.

    Science.gov (United States)

    Aoki, Ryuta; Matsumoto, Madoka; Yomogida, Yukihito; Izuma, Keise; Murayama, Kou; Sugiura, Ayaka; Camerer, Colin F; Adolphs, Ralph; Matsumoto, Kenji

    2014-04-30

    A distinct aspect of the sense of fairness in humans is that we care not only about equality in material rewards but also about equality in nonmaterial values. One such value is the opportunity to choose freely among many options, often regarded as a fundamental right to economic freedom. In modern developed societies, equal opportunities in work, living, and lifestyle are enforced by antidiscrimination laws. Despite the widespread endorsement of equal opportunity, no studies have explored how people assign value to it. We used functional magnetic resonance imaging to identify the neural substrates for subjective valuation of equality in choice opportunity. Participants performed a two-person choice task in which the number of choices available was varied across trials independently of choice outcomes. By using this procedure, we manipulated the degree of equality in choice opportunity between players and dissociated it from the value of reward outcomes and their equality. We found that activation in the ventromedial prefrontal cortex (vmPFC) tracked the degree to which the number of options between the two players was equal. In contrast, activation in the ventral striatum tracked the number of options available to participants themselves but not the equality between players. Our results demonstrate that the vmPFC, a key brain region previously implicated in the processing of social values, is also involved in valuation of equality in choice opportunity between individuals. These findings may provide valuable insight into the human ability to value equal opportunity, a characteristic long emphasized in politics, economics, and philosophy.

  20. The real estate market as the foundation of the value and forecast as a purpose: trend and real estate cycles

    Directory of Open Access Journals (Sweden)

    Paolo Rosasco

    2013-08-01

    Full Text Available The purpose of this project is that of inquiring around the relations existing among the main variables characterizing the Genovese residential real estate market which determine their performance in time through the data analysis of the two observers of the real estate market: ASSIMIL and OMI. The analysis has developed on five selected market homogeneous areas within the territory of the town of Genoa. The aim is that to test whether it’s possible or not to recognize a cyclical of values in time and how they appear by using two different sources of data. The correct forecast of the real estate market is, in fact, strategic for the valuation of the feasibility of interventions and for the construction of reliable real estate investment scenarios.