Real Options Analysis Course - Business Cases and Software Applications

Real Options
 Analysis Course......Page 5
Copyright......Page 6
Preface......Page 7
About the Author......Page 9
Contents......Page 11
Installing Crystal Ball Monte Carlo 
Simulation Software......Page 17
Installing Real Options Analysis Toolkit Software......Page 24
Getting Started with Crystal Ball Software......Page 31
Getting Started with Real Options Analysis 
Toolkit Software......Page 38
CHAPTER 3 
Framing Real Options......Page 55
Step 1: Qualify List of Projects and Strategies......Page 56
Step 2: Forecast Base-Case Variables for Each Project......Page 57
Step 3: Create Static DCF Models for Each Case......Page 58
Step 4: Monte Carlo Simulation—DCF Outputs Become 
Real Options Inputs......Page 59
Step 5: Framing the Real Options......Page 62
Step 6: Options Analytics, Simulation,
and Optimization......Page 70
Step 7: Reports, Presentations, and Update Analysis......Page 71
FINANCIAL ANALYSIS......Page 73
MONTE CARLO SIMULATION......Page 77
VOLATILITY ESTIMATES......Page 80
BINOMIAL LATTICES......Page 89
GRANULARITIES IN LATTICES......Page 93
State-Pricing Approach to Solving a European Option......Page 104
TRINOMIAL LATTICES AND AMERICAN OPTIONS......Page 106
OPTION TO ABANDON......Page 111
OPTION TO EXPAND......Page 121
OPTION TO CONTRACT......Page 133
OPTION TO CHOOSE......Page 142
COMPOUND OPTIONS......Page 152
CLOSED- FORM COMPOUND OPTIONS......Page 160
SEQUENTIAL COMPOUND OPTION......Page 164
CHANGING COSTS......Page 170
CHANGING VOLATILITY......Page 174
OPTION TO CONTRACT AND ABANDON......Page 178
BASIC BLACK- SCHOLES WITH DIVIDENDS......Page 183
BARRIER OPTIONS......Page 187
STOCHASTIC TIMING OPTIONS......Page 191
SWITCHING OPTION......Page 194
Closed-Form Equations and Binomial Convergence......Page 199
NONRECOMBINING LATTICES......Page 205
CHAPTER 7 
Extended Problems: Combining Forecasting, DCF Modeling,
Real Options, and Optimization......Page 217
CHAPTER 8 
Exercise Solutions......Page 229
CHAPTER 9 
Real Options Analysis Toolkit Software Function 
Description for Excel......Page 255
REAL OPTIONS VALUE TABLES......Page 267
IMPLIED VOLATILITY TABLES......Page 282
DIVIDEND IMPACT TABLES......Page 288
More, Faster, Cheaper—The Siren Call
 of Upstream R&D......Page 297
Real Options Analysis Applied to Valuing 
Start-Up Entities: The Digital News, Inc.......Page 300
Index......Page 311