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This book examines the applicability of a relatively new and powerful tool, genetic adaptive neural networks, to the field of option valuation. A genetic adaptive neural network model is developed to price option contracts with futures-style margining. This model is capable of estimating complex, non-linear relationships without having prior knowledge of the specific nature of the relationships. Traditional option pricing models require that the researcher or practitioner specify the distribution of the underlying asset. In addition, the methodology is able to easily accommodate additional inputs(something that cannot be preformed with existing models.
Managers in different fields are faced with investment decisions under market and technological uncertainties. The future opportunities involving uncertainties and managerial flexibility should be valued by the real options approach and no more by the methods based on discounted cash flow (DCF), since the later cannot correctly capture the operating flexibility available within the project. In this book, the authors show how to apply the real options approach to real world fields. We develop a dynamic programming approach in diverse fields characterized by different types of uncertainty, including telecommunications, sustainable transport and acquisition of innovative technological firms. Depending on the application field, we consider proprietary real options held by one firm or shared options where several competing firms hold the investment opportunity.
Environmental constraints and market uncertainties create new challenges for electricity generation. In this title, originally published in 1991, the authors present a simulation model with a capability for highly detailed activity to identify cost-minimising investment options under different assumptions about demand, costs, regulation, and other economic and environmental factors. Applying the model to two U.S. regions having sharply different electricity demand and supply characteristics, they identify the importance of advanced technologies and augmented electricity trade among regions. This title is ideal for students interested in environmental studies.
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