From the Inside Flap
Real options analysis has become a key management tool for many of today's businesses. It is an accurate method for estimating the value of corporate investments, and it can be effectively utilized in situations where management has flexibility in large capital budget decisions with high uncertainty.
Completely revised and updated to meet the challenges of today's dynamic business environment, Real Options Analysis, Second Edition offers a fresh look at evaluating capital investment strategies by taking the strategic decision-making process into consideration. This comprehensive guide provides both a qualitative and quantitative description of real options; the methods used in solving real options; why and when they are used; and the applicability of these methods in decision making.
Real Options Analysis, Second Edition is divided into three informative parts. Part One looks at the qualitative nature of real options, providing actual business cases and scenarios of real options in the industry, as well as high-level explanations of how real options provide much-needed insights for decision making. Complete with worked-out examples and mathematical formulae, Part Two looks at the mathematical concepts and step-by-step quantitative analysis needed to effectively use real options in the decision-making process. Finally, in Part Three, you'll discover how to use Real Options Valuation's Super Lattice Solver and Risk Simulator software—both developed by author Johnathan Mun and included in the companion CD-ROM (standard thirty-day trial)—to perform real options analysis like never before.
Filled with in-depth insight and expert advice, this Second Edition contains many important updates,including:
- Extended examples and step-by-step computations of American, Bermudan, European, and customized options, such as abandon, barrier, chooser, contraction, and expansion options
- Extensive coverage of advanced and exotic real and financial options, including multiple-phased sequential compound options, trinomial mean-reverting options, quadranomial jump-diffusion options, and much more
- Several brand-new case studies on applying real options in the industry as well as real options cases with step-by-step, worked-out solutions using the Super Lattice Solver software
- More-in-depth discussions of volatility estimates, discount rates, risk, and uncertainty
Real Options Analysis, Second Edition is an accessible guide to the use of real options in the decision-making process. With this book as your guide, real options expert Johnathan Mun will help you gain a firm understanding of real options analysis when valuing strategic investments and decisions, and show you how to apply it across numerous industries—from manufacturing to pharmaceuticals.
From the Back Cover
Praise for Real Options Analysis, First and Second Edition
"This book is a must-have and must-read . . . Mun's new book is a refreshing, cutting-edge look at a powerful new decision-making process . . . it isn't often you can truthfully say a book breaks new ground, but [this book] has certainly done that."
—Glenn G. Kautt, President, Monitor Group, Inc.
"Dr. Mun offers a pragmatic and useful approach to real options analysis for valuing R&D projects with inherent high uncertainty for maximum return."
—Robert S. Finocchiaro, Technical Director, 3M Company
"Mun demystifies real options analysis and delivers a powerful, pragmatic guide for decision-makers and practitioners alike. Finally, there is a book that equips professionals to easily recognize, value, and seize real options in the world around them."
—Jim Schreckengast, Senior Vice President, R&D Strategy, Gemplus International SA, France
"[Mun's] ability to clearly explain the relationships of popular competing analysis methods will make this a must-have reference book for today's decision-makers."
—Kenneth English, Director of R&D, The Timken Company
"It provides a solid basis for conceiving, assessing, and evaluating real option investments, which will make it useful to practitioners and students alike."
—Ian C. MacMillan, PhD, The Fred Sullivan Professor of Entrepreneurship Department Chair, The Wharton School, University of Pennsylvania
"Dr. Mun's new book provides the best and most comprehensive pragmatic guide to valuing strategic decisions and options—both in the corporate setting as well as in evaluating strategic military decisions. This book is an instant classic and must be read by anyone who needs to perform real options, decisions, and risk analysis."
—Tom Housel, PhD, Professor of Information Sciences U.S. Naval Postgraduate School, Monterey, California, and author of Measuring and Managing Knowledge
"Written from the viewpoint of an educator and practitioner, Mun's book offers a readable reference full of insight and decision-making tools to satisfy both the novice and the experienced veteran."
—Richard Kish, PhD, Professor and Chair, Parella Finance Department, Lehigh University
