This paper discusses the usability of real option valuation model types under different types of uncertainty. Three types of uncertainty are presented (parametric, structural and procedural), followed by a presentation of six different real option valuation types that are variably suitable for different uncertainties that in turn characterise real world decision-making situations. A usability-based mapping of real option valuation models with each type of uncertainty is made and discussed. Implications concerning decision-making are direct: wrong model selection may lead to unreliable or wrong results and, consequently, poor and often expensive investment decisions.
|Number of pages||20|
|Journal||INTERNATIONAL JOURNAL OF BUSINESS INNOVATION AND RESEARCH|
|Publication status||Published - 2016|
|MoE publication type||A1 Journal article-refereed|
- Financial modelling
- Real option valuation