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Optional law
Spurred by the advances in option theory that have been remaking financial and economic scholarship over the past thirty years, a revolution is taking shape in the way legal scholars conceptualize property and the way it is protected by the law. Ian Ayres's Optional Law explores how option theory is overthrowing many accepted wisdoms and producing tangible new tools for courts in deciding cases. Ayres identifies flaws in the current system and shows how option theory can radically expand and improve the ways that lawmakers structure legal entitlements. An option-based system, Ayres shows, gives parties the option to purchase—or the option to sell—the relevant legal entitlement. Choosing to exercise a legal option forces decisionmakers to reveal information about their own valuation of the entitlement. And, as with auctions, entitlements in option-based law naturally flow to those who value them the most. Seeing legal entitlements through this lens suggests a variety of new entitlement structures from which lawmakers might choose. Optional Law provides a theory for determining which structure is likely to be most effective in harnessing parties' private information. Proposing a practical approach to the foundational question of how to allocate and protect legal rights, Optional Law will be applauded by legal scholars and professionals who continue to seek new and better ways of fostering both equitable and efficient legal rules.
eBook
Évaluation de la Structure de Passif Par les Options Réelles
La valorisation de la structure de passif peut être appréhendée au regard des options réelles, dans la mesure où les actions d'une société peuvent être considérées comme analogues à l'achat d'une option financière d'achat. Dans cette optique, la dette peut être assimilée à la vente d'une option de vente. Ainsi, les analystes financiers peuvent répartir autrement la valeur d'entreprise entre ces deux modes de financement. Évaluation de la structure de passif par les options réelles expose en quoi la méthode innovante des options réelles est complémentaire des méthodes traditionnelles. En effet, celle-ci est particulièrement adaptée pour valoriser des entreprises appartenant à des secteurs d'activité où la volatilité d'un sousjacent est importante comme les industries minières ou pétrolières ou l'industrie pharmaceutique dont les dépenses en recherche et développement sont conséquentes. L'intégration de la valeur économique de la dette nette - et non plus comptable - et de la volatilité des actifs est la principale plus-value de cette approche.
eBook
A Real Options Approach to Renewable and Nuclear Energy Investments in the Philippines
Long description:
This book presents the application of real options approach (ROA) to analyze investment decisions for switching energy sources from fossil fuels to alternative energy. Using the Philippines as a case, the ROA models presented here explore how uncertainties including fossil fuel prices, electricity prices, discount rates, externality, renewable energy (RE) costs, and RE investment growth affect investment decisions that focus on developing countries, particularly to fossil-importing countries.
The book is a collection of academic papers published in peer-reviewed journals. The first paper analyzes investments in various RE sources including wind, solar, hydropower, and geothermal over using coal. The second paper compares investments between RE and nuclear energy considering the risk of nuclear accident. The third paper applies the proposed ROA model with the case of Palawan island and analyzes investment in RE over diesel fuel for electricity generation. The fourth paper focuses on investment drivers that make RE sources as a better option than using fossil fuels.
eBook
Growing Presence of Real Options in Global Financial Markets
The broad theme of this volume of Research in Finance is \"Comparing the Influence upon Equity Valuation of Strategy Compared with Cash Flow Expectations.\" Contributions assess the strong role of strategy in equity valuation, compared with valuation of expected dividends.
eBook
Signs that Markets are Coming Back
The volume includes two contributions on hedge funds. One evaluates the performance of hedge funds in market environments that are conducive to active management versus environments that are not. The other provides an empirical study of the market timing skills of hedge fund managers. Additionally, we have two contributions in the area of options. One extends the real options approach to options in which the underlying assets are information items such as seismic databases (rather than tangible real assets), opening the way for a complete analysis of investments along the so-called \"Virtual Value Chain.\" Another offers a significant improvement in the estimation of implied volatility by developing a least-squared-error approach to the problem of \"smiles and frowns.\" We also have an analysis of whether a firm's founders can create an artificial dividend without adversely affecting the value of the firm to other investors. From Canada, we have an empirical analysis of the current uneasy case for adding real estate investments to a portfolio. From Spain is an empirical analysis of whether earnings management activities by companies lead to an increase in qualified audit reports.
eBook
Optimal Commodity Trading with a Capacitated Storage Asset
This paper considers the so-called warehouse problem with both space and injection/withdrawal capacity limits. This is a foundational problem in the merchant management of assets for the storage of commodities, such as energy sources and natural resources. When the commodity spot price evolves according to an exogenous Markov process, this work shows that the optimal inventory-trading policy of a risk-neutral merchant is characterized by two stage and spot-price dependent basestock targets. Under some assumptions, these targets are monotone in the spot price and partition the available inventory and spot-price space in each stage into three regions, where it is, respectively, optimal to buy and inject, do nothing, and withdraw and sell. In some cases of practical importance, one can easily compute the optimal basestock targets. The structure of the optimal policy is nontrivial because in each stage the merchant's qualification of high (selling) and low (buying) commodity prices in general depends on the merchant's inventory availability. This is a consequence of the interplay between the capacity and space limits of the storage asset and brings to light the nontrivial nature of the interface between trading and operations. A computational analysis based on natural gas data shows that mismanaging this interface can yield significant value losses. Moreover, adapting the merchant's optimal trading policy to the spot-price stochastic evolution has substantial value. This value can be almost entirely generated by reacting to the unfolding of price uncertainty, that is, by sequentially reoptimizing a model that ignores this source of uncertainty.
Journal Article
A Real Options Approach to Renewable and Nuclear Energy Investments in the Philippines
Intro -- Acknowledgment -- List of Tables -- List of Figures -- List of Abbreviations -- 1 Introduction -- 1.1 Content of the Thesis -- 2 Use coal or invest in renewables: a real options analysis of energy investments in the Philippines -- 2.1 Background -- 2.2 Methodology -- 2.2.1 Net present value of investment in renewable energy -- 2.2.2 Net present value of using coal -- 2.2.3 Stochastic process and Monte Carlo simulation -- 2.2.4 Dynamic optimization and optimal trigger prices -- 2.2.5 Data and Scenarios -- 2.3 Results and Discussion -- 2.3.1 Baseline result -- 2.3.2 Sensitivity in discount rate and volatility of coal price -- 2.4 Limitations and discussion -- 2.5 Conclusion -- 2.6 Appendix -- 3 Coal, renewable, or nuclear? A real options approach to energy investments in the Philippines -- 3.1 Introduction -- 3.2 Methodology -- 3.2.1 Dynamic Optimization -- 3.2.2 Geometric Brownian Motion and Monte Carlo simulation -- 3.2.3 Risk of Nuclear Accident -- 3.2.4 Data and Scenarios -- 3.3 Results -- 3.3.1 Baseline scenario -- 3.3.2 Risk of Nuclear Accident Scenario -- 3.3.3 Negative Externality Scenario -- 3.4 Conclusion -- 4 A real options approach to renewable electricity generation in the Philippines -- 4.1 Background -- 4.2 Methods -- 4.2.1 Real options approach -- 4.2.2 Dynamic Optimization -- 4.2.3 Stochastic Prices and Monte Carlo simulation -- 4.2.4 Trigger Price Strategy -- 4.2.5 Data and Scenarios -- 4.3 Results -- 4.3.1 Baseline scenario -- 4.3.2 Electricity Price Scenario -- 4.3.3 Negative Externality Scenario -- 4.4 Conclusion -- 4.5 Appendix -- 5 Real Options Analysis of Renewable Energy Investment Scenarios in the Philippines -- 5.1 Introduction -- 5.2 Methodology -- 5.2.1 Real options model -- 5.2.2 Parameter Estimation and Investment Scenarios -- 5.3 Results and Discussion -- 5.3.1 Business as usual scenario.
Publication
Real Options in Engineering Design, Operations, and Management
Real options methodology has long been proposed as an approach to making business decisions, and the field of engineering is no exception. It is valued today as an approach for the evaluation and optimization of engineering systems under uncertainty. This book presents and synthesizes the body of knowledge in the area of real options for engineering systems. Providing case studies at the end of each application chapter, it covers engineering applications across different disciplines such as industrial and civil engineering, and computer science. Step-by-step computations of real options valuation are included.
eBook