Value Function Computation in Fuzzy Real Options by Differential Evolution

2009 Ninth International Conference on Intelligent Systems Design and Applications ◽

10.1109/isda.2009.232 ◽

2009 ◽

Author(s):

Maria Letizia Guerra ◽

Laerte Sorini ◽

Luciano Stefanini

Keyword(s):

Differential Evolution ◽

Real Options ◽

Value Function ◽

Function Computation

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Value Function Computation in Fuzzy Models by Differential Evolution

International Journal of Fuzzy Systems ◽

10.1007/s40815-017-0308-z ◽

2017 ◽

Vol 19 (4) ◽

pp. 1025-1031 ◽

Cited By ~ 2

Author(s):

Maria Letizia Guerra ◽

Laerte Sorini ◽

Luciano Stefanini

Keyword(s):

Differential Evolution ◽

Value Function ◽

Function Computation ◽

Fuzzy Models

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Truncation and approximation errors in the max-plus algorithm for H/sub ∞/ value function computation

Proceedings of the 41st IEEE Conference on Decision and Control, 2002. ◽

10.1109/cdc.2002.1184592 ◽

2003 ◽

Author(s):

W.M. McEneaney

Keyword(s):

Value Function ◽

Function Computation ◽

Approximation Errors

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The Sunk Cost and the Real Option Pricing Model

Complexity ◽

10.1155/2021/3626000 ◽

2021 ◽

Vol 2021 ◽

pp. 1-12 ◽

Cited By ~ 1

Author(s):

Songsong Li ◽

Yinglong Zhang ◽

Xuefeng Wang

Keyword(s):

Option Pricing ◽

Real Options ◽

Real Option ◽

Value Function ◽

Intrinsic Value ◽

Pricing Model ◽

Sunk Cost ◽

Financial Options ◽

Real Option Pricing ◽

Option Pricing Model

Although the academic literature on real options has grown enormously over the past three decades, hitherto an accurate real option pricing model has not been developed for investment decision analyses. In this paper, we propose a real option pricing model based on sunk cost characteristics, which can estimate the value of real options more accurately. First, we explore the distinctive features that distinguish real options from financial options. The study shows that the distinguishing feature of the real options is the sunk cost, which does not exist in the financial options. Based on the sunk cost characteristic of real options, we find that the exercise conditions of real and financial options are different. Second, we introduce the sunk cost into the intrinsic value function of real options and establish a new real option pricing model. Finally, this paper also discusses the properties of the intrinsic value function and pricing model of real options. We find that the application of the Black–Scholes option pricing model will overestimate the value of real options.

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A REAL OPTIONS APPROACH FOR PRICING ELECTRICITY TOLLING AGREEMENTS

International Journal of Information Technology & Decision Making ◽

10.1142/s0219622006002039 ◽

2006 ◽

Vol 05 (03) ◽

pp. 421-436 ◽

Cited By ~ 23

Author(s):

SHI-JIE DENG ◽

ZHENDONG XIA

Keyword(s):

Real Options ◽

Function Approximation ◽

Electricity Generation ◽

Value Function ◽

Least Squares Regression ◽

Supply Contract ◽

Value Function Approximation ◽

Real Options Approach ◽

Operational Characteristics ◽

The Right

An electricity tolling agreement (or, tolling contact) is a supply contract in which the buyer reserves the right to take the output of an underlying electricity generation asset by paying a predetermined premium to the asset owner. We propose a real options approach to value a tolling contract incorporating operational characteristics of the generation asset and contractual constraints. Dynamic programming and value function approximation by Monte Carlo based least-squares regression are employed to solve the valuation problem. The effects of different electricity price assumptions on the valuation of tolling contracts are examined through numerical examples.

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