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An Applied Course in Real Options Valuation 1st Edition

Richard L. Shockley

  • Published
  • 368 Pages


The purpose of this text is to explain the theories of option pricing, and to apply those theories to real world decision-making. There is a seamless mix of theory and practice. The theories are described and explained in an easy-to-read and understandable manner, and then applied-using various cases and real world situations-to the practical world. Competitive books in this course area are generally not formatted as textbooks with no pedagogy at all.

Richard L. Shockley, Indiana University

Richard Shockley is a recognized authority on the newly emerging field of real options, with which firms assess and lock in risks on real assets. Dr. Shockley has published in the Journal of Applied Finance, the Journal of Applied Corporate Finance, the Journal of Finance, the Global Finance Journal, the Journal of Private Portfolio Management, the Journal of Money, Credit, and Banking, and the Journal of Financial Intermediation. He has participated in many conferences and presented many invited papers at meetings across the U.S., including the Federal Reserve Board of Governors, and in Australia and Italy. He is also the recipient of many teaching awards and honors.
1. Introduction.
2. Valuation of Financial Assets.
3. Valuation of Real Assets.
4. Valuation by Arbitrage in the Binomial Model.
5. Research and Development: Valuing the Preliminary Design of a Super-Jumbo Jet at Boeing.
6. Platform Investments: How Much Are You Willing To Lose in the Name of "Strategy"? A Lesson on Volatility Estimation.
7. Multi-Staged Investments: The Staged Roll-Out of Wal-Mart Neighborhood Markets.
8. Multi-Staged Investments with Technical (or Private) Risk: Early-Stage Pharmaceutical R&D, and the Interaction of Market and Technical Risk.
9. "Rainbow" Options.
10. More On Arbitrage Valuation in the Binomial Model: Early Exercise of Options, Convenience Yield, and Value Erosion.
11. The "Traditional" Look of Convenience Yield: An Option to Develop a Coal Mine.
12. Value Erosion that Triggers Early Exercise: An Option on a Tax Credit Investment at Koch Industries.
13. Optimal Abandonment Strategy: Closing a Money-Losing Foreign Subsidiary at Mead Johnson � An Application with Foreign Exchange Risk.
14. Delayed Response to Decisions: "Fab Shells" at Intel.
15. Multiple Choices: Optimal Pollution Compliance Strategy at the Southern Company.
16. Conclusion: What Else Can You Do?