Real Options

Building Long-lived Decision Models

Are you building a house, or just pitching a tent?

When you read about decision analysis models in case studies, they're usually described in the narrative as part of an epic process, one that begins with organizational angst and ends with a resounding consensus to pull the lever on that "irrevocable allocation of resources". Right, and sometimes that really happens! But more often, the allocation of those resources is gradual, and even when a single large chunk of capital has been committed, there are steps along the path where the project is reevaluated.

Model of the Month: Valuing a Highway Concession with Real Options

For June's DPL MOTM we're highlighting a truly spectacular model from the 90's, the results of which continue to have a significant impact on one of the world's largest and fastest growing economies. The case was submitted by long-time DPL User and prominent scholar in real options valuation, Luiz Brandao, who also holds the title of Professor and Director at PUC-Rio's School of Business.

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