The fact that interest rates have fiuctuated widely over the recent years further highlights the need for studying this issue. 2010 Edition by Marcus Schulmerich (Author) Paperback 209.00 1 Used from 163.29 7 New from 156.86 After the rst edition of this book was published in early 2005, the world has changed dramatically and at a pace never seen before. To date, there has not been a comprehensive review of this issue in the academic literature. Real Options Valuation: The Importance of Interest Rate Modelling in Theory and Practice 2nd ed. Analyzing stochastic interest rates in the context of real options valuation is of particular relevance given their long time to maturity which makes them more vulnera ble to interest rate risk than short-term financial options. This title presents a step-by-step, practical approach to real options valuation to make it easily understandable by practitioners as well as senior management.
The research carried out by Marcus Schulmerich analyzes real options for n- constant and stochastic interest rates versus constant interest rates. In contrast, the real options approach to investment analysis characterizes decision-making flexibility in terms of (real) option rights which can be eval uated analogously to financial options using contingent-claims pricing tech niques widely used in capital markets. Traditional capital budgeting methods (in particular methods based on net present value) fail to capture the role of managerial degrees of free dom and therefore tend to lead to a systematic undervaluation of the project.
Managerial decision-making during the lifetime of a project can have im portant implications on project handling and its contribution to shareholder value.
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