Real options as an alternative methodology to assess investment projects
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Keywords
Real Options, Financial Options, Binomial Trees.
Abstract
This paper aims to broaden the applicability of the assessment methodology of investment projects through real options as a key element for investment decision making. Traditional project valuation methodologies are described and their gaps, which special characteristic is uncertainty, are presented. A parallel between financial and real options that could be used for valuation is made, using the binomial tree method. Finally, a case study in the construction sector shows a project valuation using expand and waiting options.
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References
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Armando Lenin Támara Ayús, Universidad EAFIT
Magíster en Finanzas de la Universidad EAFIT. Especialista en Diseño y Evaluación de Proyectos, de la Universidad del Norte. Profesor-Investigador de la Universidad EAFIT, Departamento de Finanzas, Escuela de Economía y Finanzas, Medellín, Co- lombia. Correo electrónico: atamaraa@eafit.edu.co
Raúl Enrique Aristizábal Velásquez, Universidad EAFIT
Magíster en Finanzas de la Universidad EAFIT. Especialista en Gerencia Financiera de la Universidad Pontificia Bolivariana. Profesor de la Universidad EAFIT, de la Universidad Pontificia Bolivariana y de la Escuela de Ingeniería de Antioquia, Medellín, Colombia. Correo electrónico: Raristi3@eafit.edu.coAuthors who publish with this journal agree to the following terms:
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