Real Options and Project Evaluation

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dc.creatorKnudsen, Odin K.
dc.creatorScandizzo, Pasquale L.
dc.date2017-06-27T18:59:25Z
dc.date2017-06-27T18:59:25Z
dc.date2011
dc.date.accessioned2026-07-01T01:09:48Z
dc.descriptionIn this paper authors present a preliminary approach to the evaluation of policies and projects based on current thinking on cost benefit analysis and real option methodology and the authors' recent work on the same subject. Authors start from the assumption that economic agents undertake investment projects in order to create and exploit opportunities for increasing profits, growth, wealth and, ultimately, their welfare. These opportunities are options, rights and not obligations to take some action in the future. They include not only projects undertaken, but also projects that could be adopted in the future and opportunities that can be further created or destroyed by this adoption. From the point of view of the welfare of an entire economy, opportunities enlarge the set of actions that may contribute to national wealth. Not only is this increased by the net flow of discounted benefits generated by new ventures, but also by the net value of the options created and destroyed by investment behavior. When companies develop investment opportunities, therefore, they contribute to national welfare in a more subtle, but not less important way, than when they are actively set to exploit some of these opportunities. By recognizing the direct contribution to country wealth of project design and planning, option theory may thus substantially change the theory and practice of decision making about capital investment.
dc.formatapplication/pdf
dc.formattext/plain
dc.identifierhttp://documents.worldbank.org/curated/en/300761468275362646/Real-options-and-project-evaluation-a-primer
dc.identifierhttps://hdl.handle.net/10986/27376
dc.identifierhttps://doi.org/10.1596/27376
dc.identifier.urihttp://hdl.handle.net/123456789/415730
dc.languageEnglish
dc.languageen_US
dc.publisherWorld Bank, Washington, DC
dc.rightsCC BY 3.0 IGO
dc.rightshttp://creativecommons.org/licenses/by/3.0/igo
dc.rightsWorld Bank
dc.subjectSOCIAL
dc.subjectACCOUNTING
dc.subjectAPPROACH
dc.subjectARBITRAGE
dc.subjectASSET VALUE
dc.subjectAVAILABILITY
dc.subjectBALANCE
dc.subjectBANK POLICY
dc.subjectBENCHMARKING
dc.subjectBUDGETING
dc.subjectCALL OPTION
dc.subjectCALORIFIC VALUE
dc.subjectCAPITAL FORMATION
dc.subjectCAPITAL INVESTMENT
dc.subjectCAPITAL STRUCTURE
dc.subjectCASH FLOW
dc.subjectCD
dc.subjectCOAL
dc.subjectCOLLECTIVE ACTION
dc.subjectCOMMODITIES
dc.subjectCOMPARATIVE ADVANTAGE
dc.subjectCOMPENSATION FUND
dc.subjectCOMPETITIVE MARKET
dc.subjectCONSUMERS
dc.subjectCONTINGENT VALUATION
dc.subjectCORPORATE FINANCE
dc.subjectCORPORATE INVESTMENT
dc.subjectCOST ANALYSIS
dc.subjectCOST BENEFIT ANALYSIS
dc.subjectCOST EFFECTIVENESS
dc.subjectCOST OF CAPITAL
dc.subjectCRUDE OIL
dc.subjectDAMAGES
dc.subjectDECISION MAKING
dc.subjectDECISION TREE
dc.subjectDEVELOPING COUNTRY
dc.subjectDEVELOPMENT STRATEGY
dc.subjectDIESEL
dc.subjectDISCOUNT RATE
dc.subjectDIVIDENDS
dc.subjectDRILLING
dc.subjectECONOMIC ANALYSIS
dc.subjectECONOMIC DYNAMICS
dc.subjectECONOMIC POLICIES
dc.subjectECONOMIC VALUE
dc.subjectECONOMIC WELFARE
dc.subjectELECTRONIC BANKING
dc.subjectEMPIRICAL ANALYSIS
dc.subjectENERGY GENERATION
dc.subjectENVIRONMENTAL
dc.subjectENVIRONMENTAL RISK
dc.subjectEQUILIBRIUM
dc.subjectEQUIPMENT
dc.subjectEXPECTED VALUE
dc.subjectEXPECTED VALUES
dc.subjectEXPENDITURE
dc.subjectEXPORTER
dc.subjectEXTERNAL FUNDING
dc.subjectFINANCIAL MARKETS
dc.subjectFIXED COSTS
dc.subjectFIXED EXCHANGE RATE
dc.subjectFOOD POLICIES
dc.subjectFORECASTS
dc.subjectFOREIGN INVESTMENT
dc.subjectFOREIGN INVESTORS
dc.subjectFUEL
dc.subjectFUEL COST
dc.subjectFUEL OIL
dc.subjectFUTURES
dc.subjectGAS PLANTS
dc.subjectGAS TURBINE
dc.subjectGROSS DOMESTIC PRODUCT
dc.subjectGROWTH POTENTIAL
dc.subjectHEAT
dc.subjectHEAT RATE
dc.subjectHEAT RECOVERY
dc.subjectHEAVY FUEL OIL
dc.subjectHOLDING
dc.subjectHUMAN RESOURCES
dc.subjectINFORMATION TECHNOLOGY
dc.subjectINFRASTRUCTURE DEVELOPMENT
dc.subjectINFRASTRUCTURE INVESTMENTS
dc.subjectINSURANCE
dc.subjectINTANGIBLE
dc.subjectINTANGIBLE ASSETS
dc.subjectINTEREST RATE
dc.subjectINTERNATIONAL MARKET
dc.subjectINVESTING
dc.subjectINVESTMENT BEHAVIOR
dc.subjectINVESTMENT CHOICES
dc.subjectINVESTMENT DECISION
dc.subjectINVESTMENT OPPORTUNITIES
dc.subjectINVESTMENT PROCESS
dc.subjectINVESTMENT PROJECTS
dc.subjectINVESTMENT SPENDING
dc.subjectIRREVERSIBILITY
dc.subjectJUDICIAL SYSTEM
dc.subjectLAND USE
dc.subjectLIABILITY
dc.subjectLIABILITY MANAGEMENT
dc.subjectLOAN
dc.subjectLOSS OF REVENUES
dc.subjectMARKET CONDITION
dc.subjectMARKET ECONOMY
dc.subjectMARKET PRICES
dc.subjectMARKET RISK
dc.subjectMARKET SHARE
dc.subjectMARKET SIZE
dc.subjectMATURITY
dc.subjectMOBILE PHONES
dc.subjectMULTIPLIERS
dc.subjectNATURAL GAS
dc.subjectNATURAL RESOURCES
dc.subjectNET VALUE
dc.subjectNPV
dc.subjectOIL
dc.subjectOIL EXPLORATION
dc.subjectOIL FIELD
dc.subjectOIL PRICE
dc.subjectOIL PRICES
dc.subjectOIL RESERVE
dc.subjectOIL SECTOR
dc.subjectOPPORTUNITY COST
dc.subjectOPTION VALUE
dc.subjectOWNERSHIP STRUCTURE
dc.subjectPETROLEUM
dc.subjectPIPELINE
dc.subjectPOLICY MAKERS
dc.subjectPOWER
dc.subjectPOWER PLANT
dc.subjectPRESENT VALUE
dc.subjectPRICE CHANGES
dc.subjectPRIVATE INVESTMENT
dc.subjectPRODUCTION COSTS
dc.subjectPUBLIC GOOD
dc.subjectPUBLIC SPENDING
dc.subjectPUT OPTION
dc.subjectRATE OF RETURN
dc.subjectRECOVERABLE RESERVES
dc.subjectRESOURCE ALLOCATION
dc.subjectRETURN
dc.subjectRISK NEUTRAL
dc.subjectRISK PREFERENCES
dc.subjectSAVINGS RATES
dc.subjectSOCIAL CAPITAL
dc.subjectSTEAM TURBINE
dc.subjectSTRIKE PRICE
dc.subjectSUSTAINABLE DEVELOPMENT
dc.subjectTAKEOVER
dc.subjectTREASURY
dc.subjectTREASURY BILLS
dc.subjectTROUGH
dc.subjectTURBULENCE
dc.subjectUNDERLYING ASSET
dc.subjectUNEMPLOYMENT
dc.subjectUSE VALUE
dc.subjectUTILITIES
dc.subjectVALUATION
dc.subjectVALUATIONS
dc.subjectVARIABLE COST
dc.subjectWAGES
dc.subjectWAREHOUSE
dc.subjectWATER POLLUTION
dc.subjectWEALTH
dc.subjectWELFARE ECONOMICS
dc.titleReal Options and Project Evaluation
dc.titleA Primer
dc.typeWorking Paper
dc.typeDocument de travail
dc.typeDocumento de trabajo

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