 The valuation of real options in a hybrid environmentBogdan Rębiasz (brebiasz@zarz.agh.edu.pl) Operations Research and Decisions, 2019, vol. 29, issue 1, 97-119 Abstract: The aim of this paper is to present the possibilities and purposefulness of the application of fuzzy set theory to the valuation of real options. Owing to temporal fluctuations in the market, some input parameters in a model of a real option cannot always be expressed in a precise sense. Therefore, it is natural to consider them as a fuzzy numbers. Such an approach allows us to keep more information about the possible value of real options. A hybrid (fuzzy-stochastic) model for valuing a switch option is presented. Under these assumptions, the value of a switch option will be a fuzzy random set. This article assesses the incremental benefit of product switch options in steel plant projects. Such options are valued by Monte Carlo simulation and modelling the prices of and demand for steel products using fuzzy geometric Brownian motion. Finally, the value of a product switch option is defined by the upper and lower probability distribution function. Keywords: switch options; fuzzy sets; random fuzzy sets; investment decision; Monte Carlo simulation (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:wut:journl:v:1:y:2019:p:97-119:id:1344 DOI: 10.37190/ord190106 Access Statistics for this article More articles in Operations Research and Decisions from Wroclaw University of Science and Technology, Faculty of Management Contact information at EDIRC. |
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