Real Options: Managerial Flexibility and Strategy in Resource Allocation [Hardcover]

Lenos Trigeorgis (Author)

Book Description

Publication Date: March 14, 1996

In the 1970s and the 1980s, developments in the valuation of capital-investment opportunities based on options pricing revolutionized capital budgeting. Managerial flexibility to adapt and revise future decisions in order to capitalize on favorable future opportunities or to limit losses has proven vital to long-term corporate success in an uncertain and changing marketplace.In this book Lenos Trigeorgis, who has helped shape the field of real options, brings together a wealth of previously scattered knowledge and research on the new flexibility in corporate resource allocation and in the evaluation of investment alternatives brought about by the shift from static cash-flow approaches to the more dynamic paradigm of real options -- an approach that incorporates decisions on whether to defer, expand, contract, abandon, switch use, or otherwise alter a capital investment.Comprehensive in scope, Real Options reviews current techniques of capital budgeting and details an approach (based on the pricing of options) that provides a means of quantifying the elusive elements of managerial flexibility in the face of unexpected changes in the market. Also discussed are the strategic value of new technology, project interdependence, and competitive interaction.The ability to value real options has so dramatically altered the way in which corporate resources are allocated that future textbooks on capital budgeting will bear little resemblance to those of even the recent past. Real Options is a pioneer in this area, coupling a coherent picture of how option theory is used with practical insights in into real-world applications.

Editorial Reviews

About the Author

Lenos Trigeorgis is Professor of Finance, School of Economics and Management, the University of Cyprus, and President of the Real Options Group.

Product Details

• Hardcover: 427 pages
• Publisher: The MIT Press (March 14, 1996)
• Language: English
• ISBN-10: 026220102X
• ISBN-13: 978-0262201025
• Product Dimensions: 9.2 x 6.3 x 1.1 inches
• Shipping Weight: 1.6 pounds (View shipping rates and policies)
• Average Customer Review: 4.1 out of 5 stars  See all reviews (11 customer reviews)
• Amazon Best Sellers Rank: #447,762 in Books (See Top 100 in Books)

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Customer Reviews

Most Helpful Customer Reviews

38 of 40 people found the following review helpful:

4.0 out of 5 stars Excellent introduction to real options approaches, June 17, 1998

By 

Carlos N. Velez ([e-mail]) (Rochester, New York, USA) - See all my reviews

This review is from: Real Options: Managerial Flexibility and Strategy in Resource Allocation (Hardcover)

This book is written by perhaps THE expert on real options. Dr. Trigeorgis walks the reader from traditional NPV through decision tree analysis, and finally through real options. Perhaps the most valuable discussions in the text concern the strategic and competitive ramifications of a real options mindset which traditional DCF apporaches do not capture. Highly recommended for academics and MBA finance professionals alike. Also serves as an excellent complementary text to other texts on the subject.

43 of 46 people found the following review helpful:

4.0 out of 5 stars best option book so far, July 9, 1998

By 

[e-mail] (Cambridge, UK) - See all my reviews

This review is from: Real Options: Managerial Flexibility and Strategy in Resource Allocation (Hardcover)

Unlike many other books about options, this one talks a lot about the practical qualitative implications of the options approach (and compares options to other decision tools such as decision trees). These sections are highly valuable. Like the other books on the subject, though, the bits with maths in will be incomprehensible to the general manager.

There is still room for a book less concerned with precise analysis that is theoretically correct and more concerned with practical real world problem solving. Trigeorgis doesn't get there, but comes closer than most.

11 of 12 people found the following review helpful:

5.0 out of 5 stars Probably the most comprehensive book on the subject, July 4, 2000

By 

Denis Azria - See all my reviews

This review is from: Real Options: Managerial Flexibility and Strategy in Resource Allocation (Hardcover)

This book is probably the best to get a complete picture of real options concepts. Even if the mathematical concepts included in it are difficult to grasp (particularly once one reach continuous time models), the qualitative explanations give lots of examples that help to understand what the models accomplish, if not how they do it. Interactions of real options with strategy and game theory are also presented, which helps get a feeling of what the practical applications might be.