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Terminated in academic year 2009/2010

Real Options Application

Type of study Master
Language of instruction Czech
Code 154-0309/02
Abbreviation ARO
Course title Real Options Application
Credits 3
Coordinating department Department of Finance
Course coordinator doc. Ing. Miroslav Čulík, Ph.D.

Subject syllabus

1. Introduction
- option types, parameters, intrinsic value, payoff function, etc.
2. Traditional criteria in capital budgeting
- NPV, IRR, payback period, profitability index,
- inputs estimation (FCF, cost of capital)
- advantages and shortcomings
3. Option valuation
- discrete models (binomial, trinomial, multinomial)
- continuous Black-Scholes model.
4. Real options
- introduction, basic idea and principles
- relation financial vs. real option
- types of real options (underlying asset, exercise price, payoff function, decision function).
5. Real options valuation
- application of discrete and continuous models for real options valuation,
- impact of real options on project value.
6. Real option valuation
- impact of the moment of real option exercise on project value,
- portfolio of real options and its valuation.
7. Case study - solution of illustrative example
8. Real options valuation by applying simulation techniques
9. Case study - solution of illustrative example
10. Real option application for company valuation
- theoretical fundamentals
- equity valuation as a real option
11. Case study - solution of illustrative example
12. Comprehensive case study solution
13. Comprehensive case study solution
14. Results comparison

Literature

DiLELLIO, James: Real Option Modeling and Valuation: A Decision Analysis Approach Using DPL and Excel. London: ‎ Independently published, 2022. 136 pp. ISBN 978-1521238592 .
MUN, Jonathan: Real Options Analysis: Tools and Techniques for Valuing Strategic Investments and Decisions with Integrated Risk Management and Advanced Quantitative Decision Analytics. London: ROV Press, 2019. 695 pp. ISBN 978-1734497359 .
MUN, Jonathan: Applied Analytical - Applied Project Management: Applying Monte Carlo Risk Simulation, Strategic Real Options, Stochastic Forecasting, Portfolio management, Project Management.‎ ‎New York: IIPER Press, 2020. 143 pp. ISBN 978-1734481150 .

Advised literature

JACKSON, Liam, et al. Applied Analytical - Oil and Gas Decommissioning Risk Management: Applying Monte Carlo Risk Simulation, Strategic Real Options, Stochastic Analytics. London: IIPER Press, 2020. 266 pp. ISBN 978-1734481174 .
LARRABEE, T. a J. VOSS. Valuation Techniques: Discounted Cash Flow, Earnings Quality, Measures of Value Added, and Real Options. New York: Wiley, 2022.
624 pp. ISBN 978-1118397435 .
SCHONE, M. Real Options Valuation: The Importance of Stochastic Process Choice in Commodity Price Modelling. Berlin: Springer, 2022. 118 pp. ISBN 978-3658074920 .


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