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Real Options Valuation [electronic resource] :The Importance of Interest Rate Modelling in Theory and Practice / by Marcus Schulmerich.

by Schulmerich, Marcus [author.]; SpringerLink (Online service).
Material type: materialTypeLabelBookSeries: Lecture Notes in Economics and Mathematical Systems: 559Publisher: Berlin, Heidelberg : Springer Berlin Heidelberg, 2005.Description: XVI, 357 p. online resource.ISBN: 9783540285120.Subject(s): Economics | Finance | Distribution (Probability theory) | Banks and banking | Economics/Management Science | Financial Economics | Finance /Banking | Quantitative Finance | Probability Theory and Stochastic ProcessesDDC classification: 332 Online resources: Click here to access online
Contents:
Real Options in Theory and Practice -- Stochastic Models for the Term Structure of Interest Rates -- Real Options Valuation Tools in Corporate Finance -- Analysis of Various Real Options in Simulations and Backtesting -- Summary and Outlook.
In: Springer eBooksSummary: This book analyzes real options valuation for non-constant versus constant interest rates using simulation and historical backtesting. Several real options are investigated and combined with various pricing tools and stochastic term structure models. Interest rates for real options valuation are simulated by using stochastic term structure models (Vasicek, Cox-Ingersoll-Ross, Ho-Lee, and Hull-White one-factor and two-factor models) and by using implied forward rates. The book shows that the assumption of a constant interest rate in real options valuation is not justifiable. All necessary theory is provided in the book. The analyses were conducted using a proprietary computer simulation program. All results are explained in detail and rules are derived for application in Corporate Finance practice. For the first time, a systematic analysis based on simulations and historical backtesting compares real options valuation using constant interest rates and the implied forward rates with methods that simulate interest rates stochastically.
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Real Options in Theory and Practice -- Stochastic Models for the Term Structure of Interest Rates -- Real Options Valuation Tools in Corporate Finance -- Analysis of Various Real Options in Simulations and Backtesting -- Summary and Outlook.

This book analyzes real options valuation for non-constant versus constant interest rates using simulation and historical backtesting. Several real options are investigated and combined with various pricing tools and stochastic term structure models. Interest rates for real options valuation are simulated by using stochastic term structure models (Vasicek, Cox-Ingersoll-Ross, Ho-Lee, and Hull-White one-factor and two-factor models) and by using implied forward rates. The book shows that the assumption of a constant interest rate in real options valuation is not justifiable. All necessary theory is provided in the book. The analyses were conducted using a proprietary computer simulation program. All results are explained in detail and rules are derived for application in Corporate Finance practice. For the first time, a systematic analysis based on simulations and historical backtesting compares real options valuation using constant interest rates and the implied forward rates with methods that simulate interest rates stochastically.

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