Valuation With Real Opions and Games

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alyanak, tunc (2007) Valuation With Real Opions and Games. [Dissertation (University of Nottingham only)] (Unpublished)

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Abstract

Strategic considerations concerning real options analysis were mostly focused on imperfect competition and specifically on duopoly models. In this perspective, the issues of first-mover advantages and the investment cost under uncertainty conditions were of intense concern. Moreover, although in the context of real options and competition topics such as research and development, real-estate investments, acquisitions and foreign direct investments were treated by various authors, the case of company valuation with compound real options and games has attracted less interest. In this perspective, through this research our main goal was to develop a company valuation framework which takes into account the case of a company faced with a compound real option in the context of an oligopolistic market structure. To analyse the value of a company, throughout this dissertation a hypothetical model has been formed based on a real-world case.

The hypothetical model employed has been built upon the valuation method presented by Smit & Trigeorgis (2004, 2006 and 2007). Named by these authors as the Strategic (or Expanded) Net Present Value, this method incorporates not only the traditional NPV of expected cash flows from investing immediately and the flexibility value from active management (of the company's portfolio of real options), but also the strategic (game-theoretic) value from competitive interaction.

As real-world event the case of TUPRAS an industrial company operating in the Turkish oil industry- has been employed. In line with the valuation structure proposed by Smit & Trigeorgis (2004, 2006 and 2007) and drawing on the background information of TUPRAS, our hypothetical model was applied through three parts which are: the traditional NPV, the real options value and the strategic value.

Item Type: Dissertation (University of Nottingham only)
Keywords: valuation; real options;games
Depositing User: EP, Services
Date Deposited: 06 Mar 2008
Last Modified: 30 Jan 2018 22:37
URI: https://eprints.nottingham.ac.uk/id/eprint/20970

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