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Thoughts about selected models for the valuation of real options. (English) Zbl 1244.91088
Summary: We discuss option valuation logic and four selected methods for the valuation of real options in the light of their modeling choices. Two of the selected methods the Datar-Mathews method and the fuzzy pay-off method represent later developments in real option valuation and the Black-Scholes formula and the binomial model for option pricing the more established methods used in real option valuation. The goal of this paper is to understand the big picture of real option valuation models used today and to discuss modeling perspectives for the future.

MSC:
 91G20 Derivative securities (option pricing, hedging, etc.) 91G80 Financial applications of other theories 91G60 Numerical methods (including Monte Carlo methods)
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References:
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