PRACTICABILITY OF BINOMIAL APPROACH IMPLEMENTATION WITHIN METHOD OF REAL OPTION VALUATION
Journal Title: Научно-практический журнал "Проблемы анализа риска" - Year 2016, Vol 13, Issue 4
Abstract
The subject of current research is implication of real option valuation method (ROV) & its usefulness within project evaluation. The attention is paid to investment projects with high level of risk & uncertainty. Comparing aforementioned method with traditional approaches, one can conclude that ROV includes plenty of advantages among which is management flexibility, which serves to control the process of project implementation at each step & helps investors to arrive at the decision whether to continue or abandon the project on its initial stage. Also, ROV allows the application of risk-free rate in DCF model, which significantly increases the terminal value of the project. This becomes possible because ROV considerably decreases the level of risks associated with implementation process, such as uncertainty in choosing the right moment to enter the project & possibility of bearing substantial costs. Results of our research include classification table of real options, substantiation of using risk-free rate in DCF model within ROV method & comparative characteristics of ROV vs traditional approaches. Moreover, we considered limitations of Binomial & Black — Scholes models & proved the practicability of using the Binomial approach (by the example of option to abandon).
Authors and Affiliations
N. F. Efimova, A. I. Dunaeva
Keywords
Related Articles
- EP ID EP611654
- DOI 10.32686/1812-5220-2016-13-4-46-54
- Views 149
- Downloads 0
Effective risk management involves monitoring the system properties of the world
Effective risk management involves monitoring the system properties of the world.
A NEW TYPE OF RISKS: CYBER RISKS
The article discusses the risks of using cyberspace when automating control of industrial facilities, critical facilities, in the work of management and governance bodies, and the issues of cyber security.
METHODICAL APPROACH OF THE SOLUTION OF A TASK OF OPTIMIZATION OF PLANS ACTIONS FOR DECREASE IN RISK OF EMERGENCY SITUATIONS
In article methodical approach of the solution of a task of optimization of actions plans on decrease in risk of emergency situations with simultaneous reasons for the admissible (acceptable) extent of possible damage to...
Information-psychological and religious-fundamentalist terrorism - a global problem of our time
The article deals with problems of the study of the concept and essence, types and forms of information, psychological, religious — fundamentalist and mental terrorism, the responsibility for terrorism, measures to preve...
ESTIMATION RISKS OF A SECURITY BREACH FOR CRITICAL OBJECT AND CRITICAL INFRASTRUCTURE
The article presents the method for calculating risks of a security breach for critical objects and a critical infrastructure for the existing protection system.