The purpose of this paper is to show the potential benefits of applying an approach based on real options to assess investment projects in an uncertain and flexible environment. Particularly, this paper focuses on the evaluation of the flexibility given by a multi-fuel power station. This project (more expensive than a single-fuel one) is characterized by a higher managerial flexibility, because it is able to burn two or more different fuels (switching option). To value this option, a quantitative model based on the Monte Carlo technique was developed. This method is able to consider several uncertainty sources and, therefore, overcome the limits of the traditional techniques used by the Real Option theory

Real Option Approach for the Evaluation of Investment Projects. The Case of a Multi-Fuel Power Station / Costantino, Nicola; Pellegrino, R.. - (2008), pp. 403-408. (Intervento presentato al convegno Project Management Advances, Training & Certification in the Mediterranean: PM-04 4th SCPM & 1st IPMA/MedNet Conference tenutosi a Chios, Greece nel May 29-31, 2008).

Real Option Approach for the Evaluation of Investment Projects. The Case of a Multi-Fuel Power Station

COSTANTINO, Nicola;Pellegrino R.
2008-01-01

Abstract

The purpose of this paper is to show the potential benefits of applying an approach based on real options to assess investment projects in an uncertain and flexible environment. Particularly, this paper focuses on the evaluation of the flexibility given by a multi-fuel power station. This project (more expensive than a single-fuel one) is characterized by a higher managerial flexibility, because it is able to burn two or more different fuels (switching option). To value this option, a quantitative model based on the Monte Carlo technique was developed. This method is able to consider several uncertainty sources and, therefore, overcome the limits of the traditional techniques used by the Real Option theory
2008
Project Management Advances, Training & Certification in the Mediterranean: PM-04 4th SCPM & 1st IPMA/MedNet Conference
978-960-254-677-2
Real Option Approach for the Evaluation of Investment Projects. The Case of a Multi-Fuel Power Station / Costantino, Nicola; Pellegrino, R.. - (2008), pp. 403-408. (Intervento presentato al convegno Project Management Advances, Training & Certification in the Mediterranean: PM-04 4th SCPM & 1st IPMA/MedNet Conference tenutosi a Chios, Greece nel May 29-31, 2008).
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11589/22535
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