Seminario dottorato: “Real Options: An overview”

Wednesday 19 December 2018, h. 14:30 - Room 2BC30 - Dimitrios Zormpas

ARGOMENTI: Seminars Ph.D. Program

Wednesday 19 December 2018 h. 14:30, Room 2BC30
Dimitrios Zormpas (Padova, Dip. Mat.)
“Real Options: An overview”

Financial options are contracts that derive their value from the performance of an underlying asset. They give to their holder the right, but not the obligation, to buy/sell an asset at a predetermined price and time. Contracts similar to options have been used since ancient times. However, the most basic model for their pricing was proposed in the early 1970’s leading to a Nobel prize in 1997.
In the late 1970's the term Real Options is coined by Stewart Myers. According to the real options approach an investment characterized by uncertainty and irreversibility is like a financial option on a real asset. For instance, a potential investor has the right but not the obligation to pay a given amount of money in order to make an investment and gain access to the corresponding profit flow. Using standard option pricing tools one can also study the option to leave a market, outsource production, mothball a production plant etc.
In this seminar, I will refer to the correspondence between financial and real options and then present the simplest model in the real options literature that has to do with a potential investor who is considering undertaking an uncertain and irreversible investment. Then I will present a number of applications of the real options approach from the broad literature of operations management and finally make a reference to applications of the real options approach in energy economics.

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