Journal articles: 'Option Valuation'

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Alexander, Gordon J., and Stuart M. Turnbull. "Option Valuation." Journal of Finance 44, no. 1 (March 1989): 224. http://dx.doi.org/10.2307/2328288.

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Gulabyan, A. "The Appraisal of Assets’ Fair Value Using the Real Options Technique." Review of Business and Economics Studies 8, no. 2 (March 1, 2021): 43–76. http://dx.doi.org/10.26794/2308-944x-2020-8-2-43-76.

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The goal of this paper is to analyse and systematise the possible approaches to real options valuation, especially when considering the practical aspects of their application in real-life valuation problems. Therefore, the paper sets the following tasks: To outline the concept of fair value and analyse the traditional approaches to its calculation in the context of asset valuation To define the real-option approach to fair value estimation and analyse its theoretical background To determine the role of the real options approach in the traditional system of valuation techniques To analyse the practical aspects of their application in valuation problems considering the corresponding examples To provide the real-life example of this technique applied in current market conditions using the recent data. The object of this research is the option pricing models, and the subject is their application in estimation of real options embedded in corporate valuations, particularly considering the side.

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Choi, Seungmook, and Mel Jameson. "Lookback Option Valuation." Journal of Derivatives 11, no. 2 (November 30, 2003): 53–64. http://dx.doi.org/10.3905/jod.2003.319216.

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JANG, WON-JOON, and JEONG-DONG LEE. "THE APPLICATION OF REAL OPTIONS THEORY IN DEFENSE R&D PROJECTS: AN EIGHT-FOLD SEQUENTIAL COMPOUND OPTION MODEL." International Journal of Innovation and Technology Management 08, no. 01 (March 2011): 95–112. http://dx.doi.org/10.1142/s0219877011002179.

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Today, despite the needs of more credible valuation models in defense research and development (R&D), defense decision makers mainly focus on previous cost and NPV-based approaches to evaluate them. Defense R&D projects should be considered as a sequential compound real option due to its relevant characteristics. This paper presents a real option valuation model with the use of an eight-fold compound option in the valuation of defense R&D projects and its illustrative application using a case study in the Republic of Korea. Compared to the traditional net present value (NPV) methods and their sensitivity analyses with value drivers, the paper shows the necessity of using real option approaches and their mindsets for defense decision makers to decide their defense R&D projects. The contribution of this paper is to present the real option framework in valuating of defense R&D projects, providing for the managerial flexibility with option mindsets. It also shows some limitations of using cost- and NPV-based approaches and presents real options valuation methods as its solution. The paper suggests some feasible defense policy implications that can be applied to the actual process of defense acquisition projects.

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Collan, Mikael, Robert Fullér, and József Mezei. "A Fuzzy Pay-Off Method for Real Option Valuation." Journal of Applied Mathematics and Decision Sciences 2009 (June 17, 2009): 1–14. http://dx.doi.org/10.1155/2009/238196.

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Real option analysis offers interesting insights on the value of assets and on the profitability of investments, which has made real options a growing field of academic research and practical application. Real option valuation is, however, often found to be difficult to understand and to implement due to the quite complex mathematics involved. Recent advances in modeling and analysis methods have made real option valuation easier to understand and to implement. This paper presents a new method (fuzzy pay-off method) for real option valuation using fuzzy numbers that is based on findings from earlier real option valuation methods and from fuzzy real option valuation. The method is intuitive to understand and far less complicated than any previous real option valuation model to date. The paper also presents the use of number of different types of fuzzy numbers with the method and an application of the new method in an industry setting.

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Soffer, Leonard C. "SFAS No. 123 Disclosures and Discounted Cash Flow Valuation." Accounting Horizons 14, no. 2 (June 1, 2000): 169–89. http://dx.doi.org/10.2308/acch.2000.14.2.169.

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One of the cornerstones of financial statement analysis is the discounted cash flow valuation. Despite the broad use of this valuation technique, and the economic importance of employee stock options to firm values, there is little guidance on how employee stock options should be incorporated in a valuation. This paper provides a comprehensive approach to doing so, including consideration of the income tax implications of option exercises, the simultaneity of equity and option valuation, and the use of the disclosures that were mandated recently by Statement of Financial Accounting Standards No. 123. The paper provides a comprehensive example using Microsoft's fiscal 1997 financial statements and employee stock option disclosure. This paper should be of interest to academics and practitioners involved in corporate valuation and financial statement analysis.

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Choi, Won, Doobae Jun, and Hyejin Ku. "A Valuation Formula for Chained Options with n -Barriers." Journal of Mathematics 2022 (January 18, 2022): 1–10. http://dx.doi.org/10.1155/2022/9563019.

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This study examines chained options that are connected in the sense that another barrier option becomes active continuously after the underlying asset price crosses a primary barrier. These barrier options have several advantages. First, they preserve the merit of regular barrier options, but demand far lower option premiums, which appeal to option traders. Second, they reduce the higher risk of loss of double barrier options, making option strategies more profitable in certain cases. Third, they have closed-form pricing formulas, unlike double-barrier options, and, thus, avoid the complexity of option pricing. Therefore, they help to enlarge the range of trader’s choice according to a variety of demand of buyers. The values of chained options are compared to those of similar single- and double-barrier options. This study extends the chained option with two barriers to a generalized chained option with n -barriers. In addition, this paper proves the closed formulas of generalized chained options with n-barriers using mathematical induction.

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Zhao, Jinsha. "American Option Valuation Methods." International Journal of Economics and Finance 10, no. 5 (March 29, 2018): 1. http://dx.doi.org/10.5539/ijef.v10n5p1.

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This paper implements and compares eight American option valuation methods: binomial, trinomial, explicit finite difference, implicit finite difference and quadratic approximation methods. And three Monte Carlo methods: bundling technique of Tilley (1993), simulated tree (ST) of Broadie, Glasserman, and Jain (1997), and least square regression method (LSM) of Longstaff and Schwartz (2001). Methods are compared in terms of computation efficiency and price accuracy. The findings suggest that binomial is the best performing numerical method in terms of accuracy and efficiency. LSM beats the other two simulation methods in terms of efficiency, accuracy and number of discrete exercise opportunities.

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Hewett, Thomas, and Roman Igolnikov. "Option valuation: key issues in option pricing." Balance Sheet 8, no. 4 (August 2000): 11–16. http://dx.doi.org/10.1108/09657960010373428.

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KE, ZIWEI, and JOANNA GOARD. "PENALTY AMERICAN OPTIONS." International Journal of Theoretical and Applied Finance 22, no. 02 (March 2019): 1950001. http://dx.doi.org/10.1142/s0219024919500018.

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We present a new American-style option whereby on the event of exercise before expiry, the holder pays the writer a fee (which will be referred to as a ‘penalty’). The valuation of the option is not straightforward as it involves determining when it is optimal for the holder to exercise the option, leading to a free boundary problem. As most options in the traded markets have short maturities, accurate and fast valuations of such options are important. We derive analytic approximations for the value of the option with short times to expiry (up to [Formula: see text] months) and its optimal exercise boundary. Some properties of the option, such as the put–call relationship, are explored as well. Numerical experiments suggest that our solutions both for the optimal exercise boundary and option value provide very accurate results.

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LAU, KA WO, and YUE KUEN KWOK. "VALUATION OF EMPLOYEE RELOAD OPTIONS USING UTILITY MAXIMIZATION APPROACH." International Journal of Theoretical and Applied Finance 08, no. 05 (August 2005): 659–74. http://dx.doi.org/10.1142/s0219024905003189.

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The reload provision in an employee stock option is an option enhancement that allows the employee to pay the strike upon exercising the stock option using his owned stocks and to receive new "reload" stock options. The usual Black–Scholes risk neutral valuation approach may not be appropriate to be adopted as the pricing vehicle for employee stock options, due to the non-transferability of the ownership of the options and the restriction on short selling of the firm's stocks as hedging strategy. In this paper, we present a general utility maximization framework to price non-tradeable employee stock options with reload provision. The risk aversion of the employee enters into the pricing model through the choice of the utility function. We examine how the value of the reload option to the employee is affected by the number of reloads outstanding, the risk aversion level and personal wealth. In particular, we explore how the reload provision may lower the difference between the cost of granting the option and the private option value and improve the compensation incentive of the option award.

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Dorion, Christian. "Option Valuation with Macro-Finance Variables." Journal of Financial and Quantitative Analysis 51, no. 4 (August 2016): 1359–89. http://dx.doi.org/10.1017/s0022109016000442.

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I propose a model in which the price of an option is partly determined by macro-finance variables. In an application using an index of current business conditions, the new model outperforms existing benchmarks in fitting underlying asset returns and in pricing options. The model performs particularly well when business conditions are deteriorating. Using the recent financial crisis as an out-of-sample experiment, the new model has option-pricing errors that are 18% below those of a nested 2-component volatility benchmark. Results are robust to using alternative business conditions proxies and comparing to different benchmark models.

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YAP, ROBERTO C. "Option valuation of Philippine forest plantation leases." Environment and Development Economics 9, no. 3 (May 19, 2004): 315–33. http://dx.doi.org/10.1017/s1355770x03001116.

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The Philippine forest plantation lease is modelled as an option whose value arises from market uncertainty and the irreversibility inherent in sunk costs required to establish plantations. The value of this option could be a significant factor in the planting decisions of leaseholders. Real options theory could help explain why in spite of the prospects of adequate financial returns, Filipino leaseholders are slow to establish plantations. The opportunity cost of investing is demonstrated to be highly sensitive to uncertainty of the future value of the plantation. Real options analysis is also utilized to evaluate policies intended by the Philippine government to promote plantation development.

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Adetunji, Olubanjo Michael, and Akintola Amos Owolabi. "Valuation of Interacting Time-to-Build and Growth Real Options in Infrastructure Investments." International Journal of Economics and Finance 8, no. 12 (November 17, 2016): 202. http://dx.doi.org/10.5539/ijef.v8n12p202.

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This paper argues that real options approach presents a better valuation approach for valuing infrastructure investments when compared to traditional discounted cash flow approach. Managerial flexibilities, in various forms of real options, can be incorporated into infrastructure projects to expand the projects’ values. The paper identifies two key types of real options present in infrastructure investments as time-to-build and growth options and extends an earlier developed closed-form option valuation formula to value these options. The paper uses a numerical case of investment in railroad infrastructure project and shows that both types of real options, when embedded in infrastructure projects, add values to the projects. It however shows that the value of growth option is far more than the value of time-to-build option as growth options create opportunities for follow-on investments. It also shows that when the two options are present in an infrastructure investment, the time-to-build real option interacts with the growth option to reduce the latter’s value.

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Câmara, António, Tim Krehbiel, and Weiping Li. "Displaced Jump-Diffusion Option Valuation." Journal of Derivatives 17, no. 2 (November 30, 2009): 41–58. http://dx.doi.org/10.3905/jod.2009.17.2.041.

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Bjerksund, Petter, and Gunnar Stensland. "Closed form spread option valuation." Quantitative Finance 14, no. 10 (November 3, 2011): 1785–94. http://dx.doi.org/10.1080/14697688.2011.617775.

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Heath, David C., and Stefano Herzel. "Efficient option valuation using trees." Applied Mathematical Finance 9, no. 3 (September 2002): 163–78. http://dx.doi.org/10.1080/13504860210146711.

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Mardones, JoséLuis. "Option valuation of real assets." Resources Policy 19, no. 1 (March 1993): 51–65. http://dx.doi.org/10.1016/0301-4207(93)90052-o.

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Christoffersen, Peter, Steve Heston, and Kris Jacobs. "Option valuation with conditional skewness." Journal of Econometrics 131, no. 1-2 (March 2006): 253–84. http://dx.doi.org/10.1016/j.jeconom.2005.01.010.

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Salvador, Beatriz, Cornelis W. Oosterlee, and Remco van der Meer. "Financial Option Valuation by Unsupervised Learning with Artificial Neural Networks." Mathematics 9, no. 1 (December 28, 2020): 46. http://dx.doi.org/10.3390/math9010046.

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Artificial neural networks (ANNs) have recently also been applied to solve partial differential equations (PDEs). The classical problem of pricing European and American financial options, based on the corresponding PDE formulations, is studied here. Instead of using numerical techniques based on finite element or difference methods, we address the problem using ANNs in the context of unsupervised learning. As a result, the ANN learns the option values for all possible underlying stock values at future time points, based on the minimization of a suitable loss function. For the European option, we solve the linear Black–Scholes equation, whereas for the American option we solve the linear complementarity problem formulation. Two-asset exotic option values are also computed, since ANNs enable the accurate valuation of high-dimensional options. The resulting errors of the ANN approach are assessed by comparing to the analytic option values or to numerical reference solutions (for American options, computed by finite elements). In the short note, previously published, a brief introduction to this work was given, where some ideas to price vanilla options by ANNs were presented, and only European options were addressed. In the current work, the methodology is introduced in much more detail.

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Rakic, Biljana, and Tamara Radjenovic. "Real options methodology in public-private partnership projects valuation." Ekonomski anali 59, no. 200 (2014): 91–113. http://dx.doi.org/10.2298/eka1400091r.

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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.

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Vimpari, Jussi, and Seppo Junnila. "Valuing green building certificates as real options." Journal of European Real Estate Research 7, no. 2 (July 29, 2014): 181–98. http://dx.doi.org/10.1108/jerer-06-2013-0012.

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Purpose – The purpose of this study is first to evaluate whether real options analysis (ROA) is suitable for valuing green building certificates, and second to calculate the real option value of a green certificate in a typical office building setting. Green buildings are demonstrated as one of the most profitable climate mitigation actions. However, no consensus exists among industry professionals about how green buildings and specifically green building certificates should be valued. Design/methodology/approach – The research design of the study involves a theoretical part and an empirical part. In the theoretical part, option characteristics of green building certificates are identified and a contemporary real option valuation method is proposed for application. In the empirical part, the application is demonstrated in an embedded multiple case study design. Two different building cases (with and without green certificate) with eight independent cash flow valuations by eight industry professionals are used as data set for eight valuation case studies and analyses. Additionally, cross-case analysis is executed for strengthening the analysis. Findings – The paper finds that green certificates have several characteristics similar to real options and supports the idea of using ROA in valuing a green certificate. The paper also explains how option pricing theory and discounted cash flow (DCF) method deal with uncertainty and what shortcomings of DCF could be overcome by ROA. The results show that a mean real option value of 985,000 (or 8.8 per cent premium to the mean property value) was found for a Leadership in Energy and Environmental Design Platinum certificate in the Finnish property market. The main finding of the paper suggests that the contemporary real option valuation methods are appropriate to assess the monetary value and the uncertainty of a green building certificate. Originality/value – This is the first study to argue that option-pricing theory can be used for valuing green building certificates. The identification of the option characteristics of green building certificates and demonstration of the ROA in an empirical case makes questions whether the current mainstream investment analysis approaches are the most suitable methods for valuing green building certificates.

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Mkhize, M., and N. Moja. "The application of real option valuation techniques in the cellular telecommunication industry in South Africa." South African Journal of Business Management 40, no. 3 (September 30, 2009): 1–20. http://dx.doi.org/10.4102/sajbm.v40i3.541.

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The purpose of this paper is to examine whether real option valuation techniques can be used by cellular telecommunication operators in South Africa when making capital investment decisions in next-generation service-orientated architectures. Prior studies, in other parts of the world, recommend the use of real option valuation techniques by telecommunication operators when conducting capital budgeting. In this study, both Black-Scholes and Binomial models are used to examine their effectiveness in valuing capital investments within a cellular telecommunication industry in South Africa. Results show that real option valuation techniques are effective in analysing investments in cellular telecommunication industry. Their strengths are mostly demonstrated when determining the value of strategic options that are added to traditional (base-case) net present value. Summary and conclusions are provided.

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Deng, Shi-Jie, and Shmuel S. Oren. "INCORPORATING OPERATIONAL CHARACTERISTICS AND START-UP COSTS IN OPTION-BASED VALUATION OF POWER GENERATION CAPACITY." Probability in the Engineering and Informational Sciences 17, no. 2 (February 27, 2003): 155–81. http://dx.doi.org/10.1017/s0269964803172014.

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We describe a stochastic dynamic programming approach for “real option”-based valuation of electricity generation capacity incorporating operational constraints and start-up costs. Stochastic prices of electricity and fuel are represented by recombining multinomial trees. Generators are modeled as a strip of cross-commodity call options with a delay and a cost imposed on each option exercise. We illustrate implications of operational characteristics on the valuation of generation assets under different modeling assumptions about the energy commodity prices. We find that the impacts of operational constraints on real asset valuation are dependent on both the model specification and the nature of operating characteristics.

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Ciurlia, Pierangelo, and Andrea Gheno. "Pricing and Applications of Digital Installment Options." Journal of Applied Mathematics 2012 (2012): 1–21. http://dx.doi.org/10.1155/2012/584705.

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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.

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Kim, Sungchul, Ronald Giachetti, and Sangsung Park. "Real Options Analysis for Acquisition of New Technology: A Case Study of Korea K2 Tank’s Powerpack." Sustainability 10, no. 11 (October 24, 2018): 3866. http://dx.doi.org/10.3390/su10113866.

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For sustainable defense management, it is essential to acquire weapons systems that can adapt to future uncertain threats and, at the same time, to invest efficiently with limited budgets. Economic analysis is used to examine the costs, benefits and uncertainties of alternatives. In particular, the use of the real options valuation, which is one of the methodologies of economic analysis, is expanding. The real options valuation has shown effectiveness across various industries to evaluate investment strategies. In this paper, we apply the real options valuation to the weapon systems development case and confirm its usefulness. Unlike previous studies, the real option valuation methodology is applied retroactively to the finished project, compared to existing research mainly applying real options to value research and development (R&D) without knowing how the project completed. We use the following procedure. (1) Define the uncertainties of the three acquisition alternatives (development, technology adoption, and purchase). (2) Calculate the benefits of the three acquisition alternatives with expected and actual data without uncertainties. (3) Model the decision tree without options and with options. (4) Analyze and compare results with benefit and benefit cost ratio. We analyzed the Korea K2 tank powerpack development case by applying real options. We could see that the real options could have reduced the risk of losses when the development risk is high and market uncertainty exists. From the case study of the development of the powerpack, we learned the following three lessons. First, we reaffirmed the importance of objective value analysis in project decision making. Second, we need to analyze the project value continuously and revise the acquisition strategy accordingly. Third, the effectiveness of the real options valuation was confirmed for sustainable defense management. In addition, the real option analysis data acquired from similar finished projects can be useful for establishing a new product acquisition strategy and, at every decision-making phase, the real option evaluation should be continuously performed with updated information. In this paper, we first perform real option valuation of finished weapon systems in the Korean defense field. This paper is valuable in establishing a rational methodology for applying economic analysis to weapon system acquisition projects.

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Michalski, Dariusz. "VALUATION OF COMPANIES BASED ON REAL OPTION APPROACH." Zeszyty Naukowe Wyższej Szkoły Humanitas Zarządzanie 19, no. 1 (March 30, 2018): 191–205. http://dx.doi.org/10.5604/01.3001.0012.0528.

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Traditional way of companies valuation based on discounted cash-flows do not consider the value of flexibility that managers can create. The objective of this article is the presentation of the theoretical aspects of companies valuation with real option’s approach and DCF method. The case study regards the power plant valuation. Author took assumptions that valuation method based only on DCF do not considers in proper way the flexibility connected to future companies activity. The development of valuation method by real option approach can complete these deficiencies in random environment.

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Choi, Won, and Seung Chul Ahn. "On the option valuation and decomposition of exchange option." Korean Journal of Computational & Applied Mathematics 9, no. 2 (May 2002): 575–81. http://dx.doi.org/10.1007/bf03021563.

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Adams, A. T., P. M. Booth, and B. D. MacGregor. "Lease Terms, Option Pricing and the Financial Characteristics of Property." British Actuarial Journal 9, no. 3 (August 1, 2003): 619–35. http://dx.doi.org/10.1017/s1357321700004293.

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ABSTRACTTraditional and standard discounted cash flow valuation techniques are unable to deal with a variety of options contained in lease contracts. In the United Kingdom the most important embedded option is the upward-only rent review. This becomes more valuable to the landlord in an era of low demand and low inflation, as nominal market rents are more likely to fall. Lease contracts are freely negotiated between landlord and tenant, and alternative forms of rent review clause would fundamentally change the investment characteristics of property. Many other less common options also exist in lease contracts and these create further valuation difficulties. It is essential that property valuation techniques be developed that explicitly value the options in lease contracts.

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Saługa, Piotr W., Paweł Grzesiak, and Jacek Kamiński. "Valuation of Decision Flexibility and Strategic Value in Coal Gasification Projects with the Option-To-Switch between Different Outputs." Energies 13, no. 11 (June 2, 2020): 2826. http://dx.doi.org/10.3390/en13112826.

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Coal gasification has been promoted as a sophisticated clean energy technology alternative to coal burning these days. Aside from the usual technical difficulties, economic issues of such projects—especially valuation challenges—are important problems that practitioners usually struggle with. This is because of the major extent of managerial flexibility linked with specific characteristics of coal gasification projects, in particular, possibilities to mothball/restart manufacturing lines, or change between different outputs. The value of such flexibilities may be well assessed by real options valuations. The aim of this paper is to show that for the coal gasification technologies the real options valuation is more suitable than traditional discounted cash flow technique. This approach was applied to calculate an integrated plant that can produce either electricity or methanol. As the valuation approach the multiplicative stochastic process was used. As a consequence, binomial lattices of end-product (electricity and methanol) were developed. Then, in regard to them (reference instruments), two corresponding lattices of net cash flows (consecutive instruments) were created. In the end, two trees of switching option value were developed—one for electricity production as an initial mode, and the second for methanol production, delivering expanded net present (strategic) value.

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Jain, Ashish, and Ajay Subramanian. "The Intertemporal Exercise and Valuation of Employee Options." Accounting Review 79, no. 3 (July 1, 2004): 705–43. http://dx.doi.org/10.2308/accr.2004.79.3.705.

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We propose a multiperiod model to value employee options allowing for the possibility that a risk-averse employee strategically exercises her options over time rather than at a single date. Our results describing the representative employee's option exercise behavior are broadly consistent with existing empirical evidence. The value of options to the employee and their effective cost to the firm are significantly different from the predictions of a constrained model that assumes “single date” strategic option exercise. The constrained model substantially underestimates the cost of options to the firm when, ceteris paribus, the employee's relative risk aversion and/or the time to maturity and/or the stock volatility exceed respective thresholds. Hence, the incorporation of “multiple-date” exercise has important economic and accounting consequences.

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Mintah, Kwabena, David Higgins, and Judith Callanan. "A real option approach for the valuation of switching output flexibility in residential property investment." Journal of Financial Management of Property and Construction 23, no. 2 (August 6, 2018): 133–51. http://dx.doi.org/10.1108/jfmpc-05-2017-0017.

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Purpose Uncertainties in residential property investment performance require that real estate assets are designed in a flexible manner to respond to impacts of market dynamics. Though estimating the cost of flexibility is straightforward, assessing the economic value of flexibility is not. The purpose of this study is to explore the potential practical application of real option analysis to determine the economic value of a switching output flexibility embedded in a residential property investment in Australia. The study involves the exploration of an optimal strategy for investment in a residential development through real option analysis and valuation of a mixed use investment. Design/methodology/approach The real option valuation model developed by McDonald and Siegel (1986) is adopted for the evaluation because the switching output flexibility is likened to a perpetual American call option with dividend payout. Findings Through real option analysis, the economic value of switching output flexibility of the mixed use building was determined to be higher than the initial upfront costs. Moreover, a payoff of about $4million was determined to be the value of the switching output flexibility, therefore justifying upfront investments in flexibility as an uncertainty and risk management tool. Practical implications This application is an important demonstration of the practical use of options pricing techniques (real options analysis) and delivers further evidence needed to support the adoption of real option valuation in practice. Flexibility can also enhance risks and uncertainty management in residential property investment better than the adjustment of discount rates. Originality/value There is limited evidence on the use of real options techniques for the valuation of switching output flexibility in practice, and this comes as an original application; both the case study and data are all initial applications of switching flexibility in the Australian property market.

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LIU, YU-HONG. "VALUATION OF COMPOUND OPTION WHEN THE UNDERLYING ASSET IS NON-TRADABLE." International Journal of Theoretical and Applied Finance 13, no. 03 (May 2010): 441–58. http://dx.doi.org/10.1142/s021902491000584x.

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After Geske (1979), compound options — options on options — have been employed in many fields in which real options are applied. The formula for a compound option is convenient to use in real project investment, but it has one drawback — the assets that underlie the compound options are usually non-tradable. This article addresses this issue and proposes two new compound option pricing formulae to overcome this drawback.

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Geske, Robert, and Kuldeep Shastri. "Valuation by Approximation: A Comparison of Alternative Option Valuation Techniques." Journal of Financial and Quantitative Analysis 20, no. 1 (March 1985): 45. http://dx.doi.org/10.2307/2330677.

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Artiono, Rudianto, and Dayat Hidayat. "Binomial Approach for The Valuation of Employee Stock Option with some features: Vesting Period, Exit Rate, Reload, and Reset." E3S Web of Conferences 328 (2021): 06006. http://dx.doi.org/10.1051/e3sconf/202132806006.

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An Employee stock option (ESO) is one of compensation that given by company to their employee. It gives right to the employee to buy companies stock in the future with special price that have been agreed when the options were granted. In general, the valuation of ESO pricing is different with other option pricing. ESO have some features which accommodate company importance and also consider employee behavior. This article aimed to apply the binomial approach for the valuation of ESO by considering some features such as a).Vesting period, which is waiting time to exercise the option, b). Exit rate, which is feature that consider employments shock, c). Reload, a feature that give a new option after the old one had been exercised, d). Reset, a feature that doing reset on the agreement in ESO if stock in “out of money” condition. The valuation of the ESO price have been derived from the five possibility of payoff with consideration of each features involved. This study gave the valuation of ESO which consists of two areas, namely the ESO price after vesting period and ESO price at vesting period.

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Tahani, Nabil. "Credit Spread Option Valuation under GARCH." Journal of Derivatives 14, no. 1 (August 31, 2006): 27–39. http://dx.doi.org/10.3905/jod.2006.650197.

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Mazzoni, Thomas. "Fast Analytic Option Valuation with GARCH." Journal of Derivatives 18, no. 1 (August 31, 2010): 18–38. http://dx.doi.org/10.3905/jod.2010.18.1.018.

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Cao, Jay, Jacky Chen, John Hull, and Zissis Poulos. "Deep Learning for Exotic Option Valuation." Journal of Financial Data Science 4, no. 1 (December 13, 2021): 41–53. http://dx.doi.org/10.3905/jfds.2021.1.083.

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Shilton, Leon, and James Webb. "Commercial Loan Underwriting and Option Valuation." Journal of Real Estate Research 4, no. 1 (January 1, 1989): 1–12. http://dx.doi.org/10.1080/10835547.1989.12090569.

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AMIN, KAUSHIK I., and VICTOR K. NG. "Option Valuation with Systematic Stochastic Volatility." Journal of Finance 48, no. 3 (July 1993): 881–910. http://dx.doi.org/10.1111/j.1540-6261.1993.tb04023.x.

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Haahtela, Tero. "Simulation methods in real option valuation." International Journal of Operational Research 25, no. 4 (2016): 487. http://dx.doi.org/10.1504/ijor.2016.075294.

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Nicholls, Gillian M., Neal A. Lewis, Liang Zhang, and Zhuoyuan Jiang. "Breakeven Volatility for Real Option Valuation." Engineering Management Journal 26, no. 2 (June 2014): 49–61. http://dx.doi.org/10.1080/10429247.2014.11432010.

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Heston, Steven. "Option valuation with infinitely divisible distributions." Quantitative Finance 4, no. 5 (October 2004): 515–24. http://dx.doi.org/10.1080/14697680400000035.

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Alexander, Carol, and Andrew Scourse. "Bivariate normal mixture spread option valuation." Quantitative Finance 4, no. 6 (December 1, 2004): 637–48. http://dx.doi.org/10.1080/14697680400016174.

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Carr, P. "Two extensions to barrier option valuation." Applied Mathematical Finance 2, no. 3 (September 1995): 173–209. http://dx.doi.org/10.1080/13504869500000010.

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Andricopoulos, Ari D., Martin Widdicks, Peter W. Duck, and David P. Newton. "Universal option valuation using quadrature methods." Journal of Financial Economics 67, no. 3 (March 2003): 447–71. http://dx.doi.org/10.1016/s0304-405x(02)00257-x.

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Corrado, Charles J., Bradford D. Jordan, Thomas W. Miller, and John J. Stansfield. "Repricing and employee stock option valuation." Journal of Banking & Finance 25, no. 6 (June 2001): 1059–82. http://dx.doi.org/10.1016/s0378-4266(00)00113-8.

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Nishihara, Michi. "Real option valuation of abandoned farmland." Review of Financial Economics 21, no. 4 (November 2012): 188–92. http://dx.doi.org/10.1016/j.rfe.2012.07.002.

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Zhang, Juheng, Subhajyoti Bandyopadhyay, and Selwyn Piramuthu. "Real option valuation on grid computing." Decision Support Systems 46, no. 1 (December 2008): 333–43. http://dx.doi.org/10.1016/j.dss.2008.07.003.

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Schulz, G. Uwe, and Siegfried Trautmann. "Robustness of option-like warrant valuation." Journal of Banking & Finance 18, no. 5 (October 1994): 841–59. http://dx.doi.org/10.1016/0378-4266(94)00030-1.

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Journal articles on the topic 'Option Valuation'

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