ENGLISH

Real Options Valuation: The Importance of Interest Rate Modelling in Theory and Practice

By Dr. Marcus Schulmerich CFA , FRM (auth.)

Book information

Publisher
Springer Berlin Heidelberg
Year
2005
ISBN
3540261915, 9783540261919, 9783540285120
DOI
10.1007/3-540-28512-1
Open Library ID
OL9055645M
Language
english
Format
DJVU
Filesize
4 MB (4012517 bytes)
Series
Lecture Notes in Economics and Mathematical Systems 559
Edition
1st ed
Pages
366\366
Library
Kolxo3
DPI
300
Scanned
yes
Time added
2009-07-20 03:45:11
Financial Economics; Finance /Banking; Quantitativ

Description

This book analyzes real options valuation for non-constant versus constant interest rates using simulation and historical backtesting. Several real options are investigated and combined with various pricing tools and stochastic term structure models. Interest rates for real options valuation are simulated by using stochastic term structure models (Vasicek, Cox-Ingersoll-Ross, Ho-Lee, and Hull-White one-factor and two-factor models) and by using implied forward rates. The book shows that the assumption of a constant interest rate in real options valuation is not justifiable. All necessary theory is provided in the book. The analyses were conducted using a proprietary computer simulation program. All results are explained in detail and rules are derived for application in Corporate Finance practice. For the first time, a systematic analysis based on simulations and historical backtesting compares real options valuation using constant interest rates and the implied forward rates with methods that simulate interest rates stochastically.

Similar books