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Real Options: Evaluating Corporate Investment Opportunities in a Dynamic World (Financial Times Series) Hardcover – 7 Aug 2001


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Product details

  • Hardcover: 320 pages
  • Publisher: FT PrenticeHall; 1 edition (7 Aug. 2001)
  • Language: English
  • ISBN-10: 0273653024
  • ISBN-13: 978-0273653028
  • Product Dimensions: 16.3 x 2.6 x 24.4 cm
  • Average Customer Review: 5.0 out of 5 stars  See all reviews (1 customer review)
  • Amazon Bestsellers Rank: 795,023 in Books (See Top 100 in Books)
  • See Complete Table of Contents

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"embraced by the USA's top business schools and consulting firms, real option valuation could quickly become the new standard for valuing risky ventures" USA Today, May 1999

From the Back Cover

What is the correct price to pay for a brand?

When should you cease operating an asset?

What should the maximum investment in a research project be?

How much should you buy or sell technology or a licence for?

Real option analysis allows us to make the right decision at the right time. Providing for the first time an integrated framework that can address decisions under an extreme form of uncertainty, real options analysis is one of the most important developments in business decision analysis of the last century.

Real option analysis enables us to integrate our decisions on investment, operations and disinvestment, and is altering economics, strategy, psychology and other disciplines. It follows the understanding that at least one of the value-determining variables is evolving unforecastably, following a random walk, but there will be flexibility in how we respond as that uncertainty unfolds.

Real Options

is an enlightening guide to the world of real options, explaining the concepts and offering practical information supported by case studies on how to maximize the value of real option analysis to your business.

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Most Helpful Customer Reviews

23 of 24 people found the following review helpful By A Customer on 7 Nov. 2001
Format: Hardcover
This is an excellent book. I had been initially surprised by the critical reviews for Copeland et al. and Kulatilaka et al. (Copeland, especially, has strong credentials,) but now, having looked at those books, sadly I have to agree. Then I bought this book and found a gem. The approach is fresh and we are not just presented with the same familiar textbook routes; the best part of which is that real problems are not hammered into available but inappropriate analytical solutions. The structure of the book is unusual too: 4 chapters with the foundations (including some maths but fully accessible to managers - good diagrams and plenty of intuition), 6 chapters of case studies (one, "Dixpin" by Stark, written to link with Dixit & Pindyck, the others new and based on consulting/research - nice to see non-standard cases and also more than one underlying variable!), 4 more chapters (the title of the last, "Summary for executives", speaks volumes about the authors' helpful approach, even if you're not an executive!), and 5 appendices + glossary, etc. The appendices and cases are written in the same style as the chapters of main text and the result is a very flexible resource which, I think, will be helpful for beginners, thro' 2nd year MBA and up to quite advanced practitioners.
Even when standard techniques are shown they are given innovative explanations.
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Most Helpful Customer Reviews on Amazon.com (beta)

Amazon.com: 4 reviews
35 of 35 people found the following review helpful
My view is that this is an excellent book - worthreading 23 Oct. 2001
By "littleren" - Published on Amazon.com
Format: Hardcover
This is an excellent book. I had been initially surprised by the critical reviews for Copeland et al. and Kulatilaka et al. (Copeland, especially, has strong credentials,) but now, having looked at those books, sadly I have to agree. Then I bought this book and found a gem. The approach is fresh and we are not just presented with the same familiar textbook routes; the best part of which is that real problems are not hammered into available but inappropriate analytical solutions. The structure of the book is unusual too: 4 chapters with the foundations (including some maths but fully accessible to managers - good diagrams and plenty of intuition), 6 chapters of case studies (one, "Dixpin" by Stark, written to link with Dixit & Pindyck, the others new and based on consulting/research - nice to see non-standard cases and also more than one underlying variable!), 4 more chapters (the title of the last, "Summary for executives", speaks volumes about the authors' helpful approach, even if you're not an executive!), and 5 appendices + glossary, etc. The appendices and cases are written in the same style as the chapters of main text and the result is a very flexible resource which, I think, will be helpful for beginners, thro' 2nd year MBA and up to quite advanced practitioners.
Even when standard techniques are shown they are given innovative explanations. For example, see pages 266-269 in Newton's Appendix 4, on numerical solution, which I believe is a genuinely new way of taking the well-known mathematical relationship between the Black-Scholes partial differential equation and the heat conduction equation but explaining it using common sense appreciation of heat and temperature (amazingly, he manages to obtain the combined call option payoff and stock price diagrams using a thought experiment in heat/temperature which I could actually understand!). In this single appendix are both the intuition for understanding the evolution of option prices and the details of finite difference calculations which any reader can readily reproduce. His explanation of the random walk for beginners (Appendix 5) is the best I have ever seen (I even liked the very British story about a drunken sailor taking a random walk near Her Majesty's Royal Naval Dockyard - fortunately, the book does not often digress with funny stories, but this one helped).
I am always wary of books with many co-authors (this one has seven) but here you could believe that one author wrote the whole book. Howell is the editor and presumably the author of the chapters which are not attributed; other parts are by different combinations of the seven. All are in the Real Options Group at Manchester Business School, England (Patel is at Cambridge) and that may explain the cohesion of the text.
In many ways this book is technically ahead of the game but you can tell that these guys are at a business school rather than a conventional university department - they know how to communicate with managers as well as students.
2 of 2 people found the following review helpful
Excellent first book on real options 21 July 2004
By Lim Eng Hwa - Published on Amazon.com
Format: Hardcover
If there is any book that you want as a comprehensive starter on real options, this is IT ! Definitely worth its price. Look out for the numerous case studies that illustrate the wide ranging applications - it gets me thinking about applying onto transport projects....
7 of 10 people found the following review helpful
Highly technical 24 Jan. 2002
By A Customer - Published on Amazon.com
Format: Hardcover Verified Purchase
This is a very comprehensive text. However, make no bones about it; the prose reflects a highly technical style of writing. If you have limited knowledge about differential equations, logic, and statistics, you will struggle to stay engrossed past the first few chapters. Hard reading is an understatment. I was hoping that this would be the book that could boil down what real options are and give me a straightforward approach to their applications. Reading this I feel like I am back in an astrophysics class at MIT.
1 of 1 people found the following review helpful
Great standard work on real options analysis 28 Nov. 2010
By real option - Published on Amazon.com
Format: Hardcover
This is a book that introduces the concept of real option valuation and takes the reader step by step through the theory. The examples are excellent for practitioners to use and links theory and practice in a very accesible way.
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