Ce document a été produit dans le cadre du projet « Options réelles ». CIRANO Le CIRANO est un organisme sans but lucratif constitué en vertu de la Loi des compagnies du Québec. Le financement de son infrastructure et de ses activités de recherche provient des cotisations de ses organisations-membres, d'une subvention d'infrastructure du ministère de la Recherche, de la Science et de la Technol...

The goal of this research is to develop an analytical framework for screening for real options “in” an engineering system. Real options is defined in the finance literature as the right, but not the obligation, to take an action (e.g. deferring, expanding, contracting, or abandoning) at a predetermined cost and for a predetermined time. These are called "real options" because they pertain to ph...

I address the interaction between accounting conservatism and real options in both a staged investment and abandonment model. An accounting policy biased towards classifying a Good (Bad) project as Bad (Good) is conservative (aggressive). The accounting signal is optimally conservative when the ex ante unconditional expected terminal value is less than the second investment (staged investment) ...

Real option valuation has traditionally been concerned with investment under project value uncertainty while assuming the agent has perfect confidence in a specific model. However, agents do not generally have perfect confidence in their model and this model uncertainty affects their decisions. In this work, we introduce a simple model for real option valuation to account for the agent’s aversi...

Existing project performance measures in the infrastructure sector focus on construction (time, cost, quality) and pay less attention to lifecycle performance. The consequence of this shortsighted perspective is that decisions taken early lead poorer solutions. Infrastructure should last centuries quickly becomes inadequate, leading costly reconfigurations. Real options reasoning can help manag...