A real option on a commodity is valued using an implied binomial tree (IBT) calibrated using commodity futures options prices. Estimating an IBT in the absence of spot options (the norm for commodities) allows real option models to be calibrated for the first time to market-implied probability...

We show how to implement a Rubinstein (1994) implied binomial tree using an Excel spreadsheet, but without having to use visual basic in Excel (VBA). We demonstrate both the optimization needed to generate implied ending risk-neutral probabilities from a set of actual option prices and the...

For the first time, a framework is introduced that allows for a real options analysis to be performed in an EVA/MVA-embedded binomial tree. This framework enhances traditional EVA/MVA analysis so that it can capture the additional value generated through strategic decision making during a...