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The Real Options Solution

The Real Options Solution Finding Total Value in a High-Risk World

Author: F. Peter Boer
Publisher: John Wiley & Sons
ISBN: 9780471209980
Published In: January 2002
Format: Hardback , 432 pages
Jurisdiction: International or US ? Disclaimer:
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Harness the power of real options
Real options theory is based on the Nobel Prize--winning work on financial options, and has captured the interest of executives, managers, and investors who need to understand the future profitability of an asset. Originally developed to value technology initiatives and companies, the method is now being applied broadly across various businesses and industries. The Real Options Solution offers comprehensive coverage of the real options approach with a five-step framework and examples for applying the author's unique total value model based on real options analysis. This approach will help executives and investors minimize the risk of committing to new ventures and delivers a framework flexible enough to apply to business initiatives in all types of companies.

Reviews

Drawing on the concepts of his earlier book, Valuation of Technology, and on his extensive experience as a senior executive in R&D intensive industries, Peter Boer, in his new book The Real Options Solution, has provided vital and quantitative new insight for those investing in an increasingly risk-dominated and volatile marketplace. In The Real Options Solution the author combines traditional economic evaluation with strategic evaluation based on option theory on the possible courses of action (options) that transcend the purely economic evaluations in both time and very frequently economic and other returns. This excellent book should be required reading for venture capitalists and indeed both those in, and those contemplating entry into today s and tomorrow s markets. The basic ideas here are both simple like all really good ideas and potentially very powerful as exemplified in Boer s charming presentation of Queen Isabella s investment in Columbus s first voyage. (D. Allan Bromley, Yale University)

Dr. Boer s ideas about the economics and management of industrial R&D have had a significant impact. This novel and wonderfully written book provides a modern framework for the analysis of high-risk, high-reward endeavors, which include research and development. The methodology has great intellectual appeal: it integrates real options analysis and net present value analysis, thus capturing the traits of the new and old economies in the same analytical framework. This it does in a practical, pragmatic manner, suitable to real-life problems in opportunity (and risk) management. (L. Louis Hegedus, Senior Vice President, Research & Development, ATOFINA Chemicals, Inc.)

The Real Options Solution should be read by CEOs, investors, and anyone else interested in making sense of our markets and our economy. (Jeffrey E. Garten, Dean, Yale School of Management)

This book is exciting [Boer has] taken an intellectually challenging subject and made it very interesting. (Jeffrey M. Lipton, President & CEO, NOVA Chemicals)

Introduction.

PART ONE: A NEW PERSPECTIVE ON VALUE.

The Crisis in Valuation.

Economic Value: The DCF "Gold Standard" and its Limitations.

The Total Value Model.

Enter the Options Dragon.

Why Plans are Options.

PART TWO: THE SOURCE OF WEALTH: MASTERING RISK, INNOVATION, AND THE LAW OF DIMINISHING RETURNS.

Diminishing Returns: The Dusty Road to Devolution.

Five Millennia of Value Destruction.

Does Risk Deserve its Bad Name?

Taming the Risk Bogeyman.

The Enigma of Intellectual Capital.

Innovation: The Fountain of Prosperity.

Can Government Manage Risk and Value?

Epilogue.

Endnotes.

Index.

F. PETER BOER is President and CEO of Tiger Scientific, Inc., a firm specializing in science and technology consulting and investments. He is the author of The Valuation of Technology (Wiley), and is an Adjunct Professor of Business and Engineering at Yale University, where he teaches valuation and other subjects. Dr. Boer speaks and lectures frequently for the Industrial Research Institute and is actively engaged with companies that are using options-based methods to evaluate their R&D portfolios.