scholarly journals A Patent Race in a Real Options Setting: Investment Strategy, Valuation, CAPM Beta and Return Volatility

2004 ◽  
Author(s):  
Rujing Meng
Keyword(s):  
Real Options ◽  
Investment Strategy ◽  
Return Volatility ◽  
Patent Race ◽  
Capm Beta

THE VALUE OF FLEXIBILITY IN ADAPTING TO CLIMATE CHANGE: A REAL OPTIONS ANALYSIS OF INVESTMENTS IN COASTAL DEFENSE

2012 ◽  
Vol 03 (02) ◽  
pp. 1250008 ◽  
Author(s):  
PETER LINQUITI ◽  
NICHOLAS VONORTAS
Keyword(s):  
Climate Change ◽  
Real Options ◽  
International Development ◽  
Monte Carlo Model ◽  
Investment Strategy ◽  
First Year ◽  
Adaptation To Climate Change ◽  
Coastal Defense ◽  
Institutional Capability ◽  
Over Time

Adaptation to climate change is likely to be a significant challenge for developing countries. We examine whether a real options approach that recognizes uncertainty and maintains future flexibility can provide an improved adaptation investment strategy. We use a Monte Carlo model to test four strategies for defending against sea level rise. Two of the strategies are inflexible, with the coastal defense fully specified in the first year of analysis. The other two strategies are flexible real options that allow adjustments in the coastal defense over time. We emphatically show that a real options strategy has the potential to increase the benefits of proactive adaptation. Our results prove to be location-dependent, underscoring the need for location-specific analysis. We find that the quality of the information obtained over time has an important bearing on option value and that a country's institutional capability and the specific mechanisms of international development assistance may affect implementation.

scholarly journals Investments Under Uncertainty in Air Transportation: A Real Options Perspective

2010 ◽  
Author(s):  
Bruno Miller ◽  
John-Paul Clarke
Keyword(s):  
Real Options ◽  
Air Transportation ◽  
Investment Strategy ◽  
Evaluation Methodology ◽  
Infrastructure Investment ◽  
Lead Times ◽  
Delivery Strategies ◽  
Managing Risk ◽  
Political Uncertainties ◽  
Flexible Infrastructure

Infrastructure investment decisions in air transportation are difficult because of long lead times, large capital expenditures and the technological, market and political uncertainties inherent in aviation. In such an environment, a flexible investment strategy is a means of managing risk. The central idea is to structure the investment so that it would benefi t from the upside potential if circumstances are resolved favorably, but would be protected from downside losses otherwise. In this paper, an evaluation methodology based on system dynamics and Monte Carlo simulation in a real options framework is utilized to evaluate different flexible infrastructure delivery strategies.

scholarly journals Stock Return Volatility, Firm Real Option Value, And Mergers And Acquisitions Premiums

2021 ◽  
Author(s):  
Uyen (Wendy) Nguyen
Keyword(s):  
Mergers And Acquisitions ◽  
Real Options ◽  
Stock Return ◽  
Real Option ◽  
Return Volatility ◽  
Option Value ◽  
Leverage Ratio ◽  
Stock Return Volatility ◽  
Options Value ◽  
Real Option Value

Considerable effort has been devoted to indicate the critical determinants of acquisition premiums. However, the determinants of mergers and acquisitions (M&A) premiums are not yet fully understood. This research paper empirically examines the effect of stock return volatility on mergers and acquisitions premiums through real options value of bidder and target firms. With a sample of 2,559 completed M&A deals in the US during 1986-2016, we find that bidder firms tend to pay more premiums for the targets that have more future real option value and higher risk. To be more specific, when targets have more real options measured as high Research and Development (R&D) to market value, high sales growth rate, and low leverage ratio, the relationship between target return volatility and acquisition premiums is stronger. This study contributes not only to the literature regarding the determinants of mergers and acquisitions premiums but also to the literature of real options value. Keywords: Mergers and acquisition premiums, acquisition premiums, stock return volatility, real options, growth options

scholarly journals DOES DEFAULT RISK MATTER FOR INVESTORS IN REITS

2020 ◽  
Vol 24 (5) ◽  
pp. 1-14
Author(s):  
Yezhou Sha ◽  
Zilong Wang ◽  
Ziwen Bu ◽  
Nick Mansley
Keyword(s):  
Stock Returns ◽  
Risk Premium ◽  
Default Risk ◽  
Negative Relationship ◽  
Investment Strategy ◽  
Idiosyncratic Volatility ◽  
Asset Growth ◽  
Capm Beta ◽  
The Relationship

We investigate the relationship between default risk and REIT stock returns. A default risk long-short investment strategy generates a return of 15% per annum. We also evaluate a large number of potential explanations for the negative relationship between default risk and subsequent stock returns. We do not find robust evidence that the default risk premium can be explained by firm size, book-to-market equity, asset growth and idiosyncratic volatility. However, CAPM beta shows some promise in explaining the default risk premium. Our results shed further light on the role of default risk in investment in REITs.

scholarly journals Investment evaluation in renewable projects under uncertainty, using real options analysis: the case of wind power industry

2017 ◽  
Vol 14 (1) ◽  
pp. 96-103 ◽  
Author(s):  
Ioannis Kinias ◽  
Ioannis Tsakalos ◽  
Nikolaos Konstantopoulos
Keyword(s):  
Wind Energy ◽  
Real Options ◽  
Electricity Market ◽  
Flow Analysis ◽  
Investment Strategy ◽  
Investment Analysis ◽  
Real Options Analysis ◽  
The Real ◽  
Capital Costs ◽  
Regulatory Policies

Investment analysis is a crucial process for any investment’s success. This process can be supported by both the discounted cash flow analysis and the real options analysis. Many researchers have point out restrictions for the first one, in cases of uncertainty in the entrepreneurial environment. The main types of uncertainty, concerning the wind energy sector, include uncertainties related to the price of electriticity by RES, the public policy regulatory policies, the demand, the initial capital costs, the technological progress, the weather conditions, the political and economical situations and generally the RES market structure. In this paper, we try to find the optimal investment strategy in a liberalized global electricity market, where the price of electricity is uncertain while the other parameters are configured separately in each country. The authors consider about the factors of the time for investment and the electricity’s price level, in wind energy by using the real options theory. The authors select a variety of data for the wind energy industry from different countries in several continents, and also create a model for the investment analysis in this entrepreneurial sector.

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