A root mean square fuzzy pay-off approach for real options valuation of energy projects

Wilna Lesperance, Laurent Linguet () and Jules Sadefo Kamdem
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Wilna Lesperance: UG - Université de Guyane
Laurent Linguet: UG - Université de Guyane

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Abstract: In recent years, the real options theory has greatly developed, particularly in the energy sector. Owing to energy markets liberalization, it has become a highly uncertain and competitive sector. In this context, traditional valuation tools such as the net present value have shown significant limits, notably in terms of valorization of managerial flexibility. Nowadays, real options are evaluated by models based on fuzzy logic and fuzzy set theory as well. This paper introduces an adaptation of the root mean square approach by Chandramohan et al. (2006) for the real options valuation. The illustrative example from Borges et al.' article (2018) was used to discuss the results in comparison with other fuzzy pay-off methods. This new approach shows satisfactory results suggesting a better valuation of the real options.

Keywords: Real option; Fuzzy pay-off; Root mean square; Oilfield (search for similar items in EconPapers)
Date: 2020-12-01
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Published in ICAE 2020 : The 12th International Conference on Applied Energy, Dec 2020, Bangkok, Thailand

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03675936

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