Real Options Valuation and Analysis Excel Model
Originally published: 04/07/2018 12:10
Publication number: ELQ-61158-1
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Real Options Valuation and Analysis Excel Model

The Excel real options valuation and analysis provides quantification of embedded value in investment strategies.

The Excel real options valuation and analysis provides quantification of embedded value in potential business and investment strategies. Uncertainty surrounding potential cash flows from real options that exist from alternative strategic outcomes can be assessed for the valuation of those options. Real options can include multiple branch outcome possibilities competitive environment scenarios or options to abandon, expand or delay proposed projects.

The Excel real options solution provides a set and analytical tools for valuing strategic business management decisions that have a range of possible outcomes. Potential volatility of project or business cash flows can be utilized as a proxy for underlying risk for which a valuation can be derived based on the probability of each outcome eventuating. The Real Options Valuation model provides a simple guide in order to select and employ the most relevant valuation solution to the proposed strategy being considered. A modified Black Scholes option pricing model is provided to quantify the value in abandoning, delaying or expanding business projects. The Nash equilibrium game theory model is provided to evaluate the benefit of being a leader or follower when entering a competitive market. The binomial option valuation model allows the creation of multiple binary branches with corresponding outcome probabilities to flow back to the valuation at the origin node.

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Further information

Value options in business strategies

Real options for business investment management

Derivatives trading strategies


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