Simulation methods in real option valuation
by Tero Haahtela
International Journal of Operational Research (IJOR), Vol. 25, No. 4, 2016

Abstract: Simulation is an efficient and versatile method for real option valuation. This paper presents different ways to take advantage of this numerical approach to valuing real investments with managerial flexibility under uncertainty. The methods discussed are classified into three categories: classical methods, simulated pseudo-underlying asset methods and advanced soft computing methods. Each category, with its typical methods and variants, is discussed according to its strengths and shortcomings from the practitioner's point of view, and then a comparison is made between the alternatives according to their usability and technical properties. The purpose is to show both researchers and practitioners the diversity of simulation-based real option valuation methods and what opportunities they provide when chosen to correspond to the valuation cases.

Online publication date: Thu, 10-Mar-2016

The full text of this article is only available to individual subscribers or to users at subscribing institutions.

Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.

Pay per view:
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.

Complimentary Subscribers, Editors or Members of the Editorial Board of the International Journal of Operational Research (IJOR):
Login with your Inderscience username and password:

    Username:        Password:         

Forgotten your password?

Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.

If you still need assistance, please email