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Valuation Of Real Options Through The Least Square Monte Carlo Approach
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Book Synopsis Valuation of real options through the least square monte carlo approach by :
Download or read book Valuation of real options through the least square monte carlo approach written by and published by . This book was released on 2003 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: O presente trabalho tem como objetivo testar empiricamente a eficiência e a aplicabilidade do método dos mínimos quadrados de Monte Carlo (LSM) na avaliação de projetos envolvendo opções reais. Inicialmente, o método passoupor uma série de testes de sensibilidade para validação do mesmo. Em seguida, alguns exemplos de projetos de exploração e produção (E & P) de petróleo com opções reais foram elaborados, e seus valores determinados através do LSM. Estes resultados foram comparados aos resultados obtidos com o modelo binomial que, devido a sua simplicidade e ampla utilização, foi escolhido comobenchmark para analisar a eficiência do método LSM. Devido às semelhanças entre oportunidades de investimento em ativos financeiros e reais, muitos estudos são realizados no sentido de adaptar instrumentos financeiros para a avaliação econômica de projetos. Muitas pesquisas sobre opções reais foram desenvolvidas em exploração de recursosnaturais, em especial de E & P de petróleo. Isso ocorre devido ao porte dos investimentos que são realizados neste setor e as suas características peculiares: o mercado de petróleo é bem desenvolvido (presença de mercado futuro, instrumentos de proteção financeira, derivativos etc); os investimentos ocorrem num ambiente de incertezas econômicas e / ou técnicas; os projetos demandam uma série de flexibilidades gerenciais (prazos alternativos paraexecução dos investimentos, possibilidade de mudanças na escala do projeto, entre outras). Tais características fazem com que seja necessária uma avaliação mais cautelosa e criteriosa destes ativos reais. Uma nova ferramentadesenvolvida neste sentido é o método LSM, que consiste na avaliação de opções americanas através de simulações e de regressões simples.
Book Synopsis Real Options Valuation by : Andrea Gamba
Download or read book Real Options Valuation written by Andrea Gamba and published by . This book was released on 2019 with total page 71 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides a numerical approach based on a Monte Carlo simulation for valuing dynamic capital budgeting problems with many embedded real options dependent on numerous state variables. We propose a way of decomposing a complex capital budgeting problem with many options into a set of simple options, suitably accounting for interaction and interdependence among them. The decomposition approach is numerically implemented using an extension of the Least Squares Monte Carlo algorithm, presented by Longstaff and Schwartz (2001) applied to our multi-option setting. We also provide a number of applications of our approach to well-known real options models and real life capital budgeting problems. Moreover, we present a set of numerical experiments to provide evidence for the accuracy of the proposed methodology.
Book Synopsis The Valuation of Real Options with the Least Squares Monte Carlo Simulation Method by : Artur Rodrigues
Download or read book The Valuation of Real Options with the Least Squares Monte Carlo Simulation Method written by Artur Rodrigues and published by . This book was released on 2006 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides a detailed analysis of the Least Squares Monte Carlo Simulation Method (Longstaff and Schwartz, 2001) and of the extension of Gamba (2003) to value portfolios of real options. The accuracy of the method is assessed when valuing stylised real options as maximum, compound or mutually exclusive options. For the latter, we propose an improved algorithm that is faster, more accurate as well as more reliable. The analysis is carried out for a large number of call and put options. It is done comparing alternative polynomial families and simulation methods, including moment matching techniques and low-discrepancy sequences. Unlike previous analysis of the method, our results suggest that the use of weighted Laguerre polynomials, initially proposed by Longstaff and Schwartz (2001), produces more accurate estimates. We show also that the choice of the best simulation method is contingent on the problem in hand. Low-discrepancy sequences tend to produce more accurate estimates, using fewer paths than pseudo-random numbers. The accuracy of the method depends on the payoff function and seems to converge, increasing both the number of basis and the number of simulated paths.
Book Synopsis Assessing the Least Squares Monte-Carlo Approach to American Option Valuation by : Lars Stentoft
Download or read book Assessing the Least Squares Monte-Carlo Approach to American Option Valuation written by Lars Stentoft and published by . This book was released on 2001 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Valuing American Options by Simulation by : Laura Hass Thomsen
Download or read book Valuing American Options by Simulation written by Laura Hass Thomsen and published by . This book was released on 2015 with total page 97 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Real Options Analysis by : Jason B. Legrand
Download or read book Real Options Analysis written by Jason B. Legrand and published by . This book was released on 2012 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The real option methodology is the generalized approach in corporate financial decision-making, investing and valuation. Traditionally, real option models reflect stochastic underlying processes and flexibility. In this book, the authors present topical research in the study of real options analysis, including the valuation of oil and gas reserves using cointegrated prices and least-squares Monte Carlo; flexibility in sequential investment and catastrophic risk; the survey of fuzzy-stochastic real option models and their application and possibilities and optimal control and real options models..
Book Synopsis Convergence of the Least Squares Monte-Carlo Approach to American Option Valuation by : Lars Stentoft
Download or read book Convergence of the Least Squares Monte-Carlo Approach to American Option Valuation written by Lars Stentoft and published by . This book was released on 2002 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Approving Least Squares Monte Carlo Approach for Valuing American Options by : Lei Zhang
Download or read book Approving Least Squares Monte Carlo Approach for Valuing American Options written by Lei Zhang and published by . This book was released on 2004 with total page 284 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis On Improving the Least Squares Monte Carlo Option Valuation Method by : Nelson Areal
Download or read book On Improving the Least Squares Monte Carlo Option Valuation Method written by Nelson Areal and published by . This book was released on 2018 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies various possible approaches to improving the least squares Monte Carlo option valuation method. We test different regression algorithms and suggest a variation to estimating the option continuation value, which can reduce the execution time of the algorithm by one third. We test the choice of varying polynomial families with different number of basis functions. We compare several variance reduction techniques, and find that using low discrepancy sequences can improve the accuracy up to four times. We also extend our analysis to compound and mutually exclusive options. For the latter, we propose an improved algorithm which is faster and more accurate.
Book Synopsis Real Options Analysis Course by : Johnathan Mun
Download or read book Real Options Analysis Course written by Johnathan Mun and published by Wiley. This book was released on 2003-04-15 with total page 320 pages. Available in PDF, EPUB and Kindle. Book excerpt: Praise for Real Options Analysis Course "Dr. Mun's latest book is a logical extension of the theory and application presented in Real Options Analysis. More specifically, the Real Options Analysis Course presents numerous real options examples and provides the reader with step-by-step problem-solving techniques. After having read the book, readers will better understand the underlying theory and the opportunities for applying real option theory in corporate decision-making." -Chris D. Treharne, President, Gibraltar Business Appraisals, Inc. "This text provides an excellent follow up to Dr. Mun's first book, Real Options Analysis. The cases in Real Options Analysis Course provide numerous examples of how the use of real options and the Real Options Analysis Toolkit software can assist in the valuation of strategic and managerial flexibility in a variety of arenas." -Charles T. Hardy, PhD, Chief Financial Officer & Director of Business Development, Panorama Research, Inc. "Most of us come to real options from the perspective of our own areas of expertise. Mun's great skill with this book is in making real options analysis understandable, relevant, and immediately applicable to the field within which you are working." -Robert Fourt, Partner, Gerald Eve (UK) "Mun provides a practical step-by-step guide to applying simulation and real options analysis-invaluable to those of us who are no longer satisfied with conventional valuation approaches alone." -Fred Kohli, Head of Portfolio Management, Syngenta Crop Protection Ltd. (Switzerland)
Book Synopsis Real Options Analysis by : Johnathan Mun
Download or read book Real Options Analysis written by Johnathan Mun and published by John Wiley & Sons. This book was released on 2012-07-02 with total page 603 pages. Available in PDF, EPUB and Kindle. Book excerpt: "Mun demystifies real options analysis and delivers a powerful, pragmatic guide for decision-makers and practitioners alike. Finally, there is a book that equips professionals to easily recognize, value, and seize real options in the world around them." --Jim Schreckengast, Senior VP, R&D Strategy, Gemplus International SA, France Completely revised and updated to meet the challenges of today's dynamic business environment, Real Options Analysis, Second Edition offers you a fresh look at evaluating capital investment strategies by taking the strategic decision-making process into consideration. This comprehensive guide provides both a qualitative and quantitative description of real options; the methods used in solving real options; why and when they are used; and the applicability of these methods in decision making.
Book Synopsis Real Options and Intellectual Property by : Philipp N. Baecker
Download or read book Real Options and Intellectual Property written by Philipp N. Baecker and published by Springer Science & Business Media. This book was released on 2007-08-06 with total page 279 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book proposes an integrated approach to patent risk and capital budgeting in pharmaceutical research and development (R and D), developing an option-based view (OBV) of imperfect patent protection, which draws upon contingent-claims analysis, stochastic game theory, as well as novel numerical methods. The text re-initiates a discussion about the contribution of quantitative frameworks to value-based R and D management.
Book Synopsis Real Options and Investment Under Uncertainty by : Eduardo S. Schwartz
Download or read book Real Options and Investment Under Uncertainty written by Eduardo S. Schwartz and published by MIT Press. This book was released on 2004 with total page 890 pages. Available in PDF, EPUB and Kindle. Book excerpt: The study of investment under uncertainty was stagnant for several decades until developments in real options revitalized the field. The topics covered in this book include the reasons behind the under-investment programme.
Book Synopsis On the Dangers of a Simplistic American Option Simulation Valuation Method by : Nelson Areal
Download or read book On the Dangers of a Simplistic American Option Simulation Valuation Method written by Nelson Areal and published by . This book was released on 2018 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Chen and Shen (2003) argue that it is possible to improve the Least Squares Monte Carlo Method (LSMC) of Longstaff and Schwartz (2001) to value American options by removing the least squares regression module. This would make not only faster but also more accurate. We demonstrate, using a large sample of 2500 put options that the proposed algorithm - the Perfect Foresight Method (PFM) - is, as argued by the authors, faster than the LSMC algorithm but, contrary to what they state, it is not more accurate than the LSMC. In fact, the PFM algorithm incorrectly prices American options, resulting in an upward biased value of the option. We therefore, do not recommend the use of the PFM.
Book Synopsis Use of the Monte Carlo Simulation in Valuation of European and American Call Options by : Gorica Malesevic
Download or read book Use of the Monte Carlo Simulation in Valuation of European and American Call Options written by Gorica Malesevic and published by . This book was released on 2017 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis examines the valuation methods used for pricing European and American call options. Options are financial instruments that play an important role in the financial industry and are used in hedging, speculating and arbitraging. Because options are widely used in investing, there is a need for valuation methods that are as precise as possible. Options have been perceived as obscure financial instruments due to the lack of valuation techniques in the past. However, with the discovery of Black-Scholes Model in 1973, the first option valuation method, option trading escalated. In this thesis, the fair market value of S & P 500 index with European exercise style, The Google Option Contract and Apple Option Contract will be obtained bu using the Black-Scholes Model, the General Monte Carlo Simulation, The Combined Method and the Least-Square Monte Carlo. The results from three models with be compared and contrasted in order to determine the best valuation method.
Book Synopsis Comparison of Least Squares Monte Carlo Methods with Applications to Energy Real Options by : Selvaprabu Nadarajah
Download or read book Comparison of Least Squares Monte Carlo Methods with Applications to Energy Real Options written by Selvaprabu Nadarajah and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Least squares Monte Carlo (LSM) is a state-of-the-art approximate dynamic programming approach used in financial engineering and real options to value and manage options with early or multiple exercise opportunities. It is also applicable to capacity investment and inventory/production management problems with demand/supply forecast updates arising in operations and hydropower-reservoir management. LSM has two variants, referred to as regress-now/later (LSMN/L), which compute continuation/value function approximations (C/VFAs). We provide novel numerical evidence for the relative performance of these methods applied to energy swing and storage options, two typical real options, using a common price evolution model. LSMN/L estimate C/VFAs that yield equally accurate (near optimal) and precise lower and dual (upper) bounds on the value of these real options. Estimating the LSMN/L C/VFAs and their associated lower bounds takes similar computational effort. In contrast, the estimation of a dual bound using the LSML VFA instead of the LSMN CFA takes seconds rather than minutes or hours. This finding suggests the use of LSML in lieu of LSMN when estimating dual bounds on the value of early or multiple exercise options, as well as of related capacity investment and inventory/production policies.
Book Synopsis Modern Approach to Valuation by : Valerijs Kulickis
Download or read book Modern Approach to Valuation written by Valerijs Kulickis and published by . This book was released on 2008 with total page 101 pages. Available in PDF, EPUB and Kindle. Book excerpt:
