Real Options Analysis: Where Are the Emperor's Clothes?
Once a topic of interest only to finance specialists, real options analysis now receives active, mainstream attention in business schools and industry. This article provides practitioners with a critical review of five well-established real options approaches that are extensively documented in the academic and professional literature. These approaches include the "classic approach" and "revised classic approach" (as proposed by Martha Amram and Nalin Kulatilaka), the "subjective approach" (as proposed by Tim Luehrman), the "MAD Approach" (as proposed by Tom Copeland and Vladimir Antikarov), and the "integrated approach" (as proposed by James Smith and Robert Nau). The article discusses the assumptions, mechanics, and potential range of applications of each approach, along with the results when applied to a simple case involving development of a natural gas field. 2005 Morgan Stanley.
Year of publication: |
2005
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Authors: | Borison, Adam |
Published in: |
Journal of Applied Corporate Finance. - Morgan Stanley, ISSN 1078-1196. - Vol. 17.2005, 2, p. 17-31
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Publisher: |
Morgan Stanley |
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