Quantifying Flexibility Real Options Calculus

V. G. Makhankov and M. A. Aguero-Granados

MPRA Paper from University Library of Munich, Germany

Abstract: We expose a real options theory as a tool for quantifying the value of the operating flexibility of real assets. Additionally, we have pointed out that this theory is an appropriated methodology for determining optimal operating policies, and provide an example of successful application of our approach to power industries, specifically to valuate the power plant of electricity. In particular by increasing the volatility of prices will eventually lead to higher assets values.

Keywords: real options; Black-Scholes Approach; Wiener processes; stochastic processes; Quantifying Flexibility; volatility (search for similar items in EconPapers)
JEL-codes: C01 C02 C60 G00 (search for similar items in EconPapers)
Date: 2010-07-07
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