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##### 决策分析Decision Analysis：Alternative Approaches for Solving Real-Options Problems

Decision Analysis
Alternative Approaches for Solving Real-Options Problems
(Comment on Brandão et al. 2005)
North Carolina jes9@duke.edu

the use of binomial lattices instead of trees, and alternative methods for estimating volatilities. More fundamentally,
I discuss alternative approaches that rely entirely on risk-neutral valuation and model the uncertainties in
the problem more directly.
Key words: decision analysis; real options; decision trees; binary approximations
History: Received on May 23, 2005. Accepted by Don Kleinmuntz on July 29, 2005, after 2 revisions.
1. Introduction
The real-options approach to evaluating investments
dates back to Myers (1977, 1984), who suggested
using techniques like those used to value put and call
options on stocks to value real (nonfinancial) investments
where management can “exercise options” toadapt strategies during the course of the project.Some have taken this charge quite literally and suggestusing the Black-Scholes formula for valuing putand-
call options on a stock to value real projects(see, e.g., Luehrman 1998). Applying this formula inreal-options applications requires drawing an analogybetween the project and a put or call option:
For example, starting the project is like exercising acall option with a strike price equal to the capitalinvestment required for the project. Of course, decisionanalysts have long modeled options or “downstream
decisions” using decision tree models. Whileoptions may be familiar to decision analysts, realoptionsanalysis typically uses a risk-neutral valuationprocedure that is less familiar to decisionanalysts. The risk-neutral valuation procedure incorporatesrisk premiums by risk-adjusting probabilitiesrather than risk-adjusting discount rates or determining
certainty equivalents using a utility function.Brandão et al. (BDH) (2005) describe an approachfor solving real-options problems that builds on theideas of Copeland and Antikarov (2001, hereafterC&A) and uses traditional decision analysis tools.Specifically, BDH propose a three-step process:
(1) Calculate the expected net present value (NPV)of the project without options using a deterministicdiscounted cash flow (DCF) analysis based on a riskadjusteddiscount rate.
(2) Estimate the volatility of the value of the project
without options using this discounted cash flow
model and a Monte Carlo simulation that describesthe uncertainty in the project cash flows.
(3) Build a binomial tree that approximates a geometricBrownian motion approximation of the uncertaintyin the value of the project without options overtime and incorporate options in this tree. In this step,values are calculated using risk-neutral valuation, thatis, calculating expected NPVs using risk-neutral probabilitiesand discounting at the risk-free interest rate.In Steps 1 and 2, BDH follow C&A exactly. In 论文英语论文网提供整理，提供论文代写英语论文代写代写论文代写英语论文代写留学生论文代写英文论文留学生论文代写相关核心关键词搜索。