Mathématiques industrielles
A Real Options Approach to Account for Risk Aversion in the Valuation of Managerial Cash-Flow Estimates
Jaimungal, Sebastian and Yuri Lawryshyn
University of Toronto

While there are a number of academic papers discussing the importance of accounting for risk aversion in real option valuation, none of them are applicable to discrete cash-flow estimates supplied by managers. Recently, we introduced a method where we use any stochastic (Markov) process that can be mapped to managerial cash-flow estimates, to drive the cash-flows. The mapping allows us to link the cash-flow estimates to many theoretical real options frameworks which currently cannot be applied in practice. Through indifference pricing we are able to model the effect of risk aversion. We provide real world examples of the application of the methodology and show, through simulation, the effect of hedging the correlated portion of the cash-flows to a traded asset.

Mardi, 18 juin, 11h30
Salle George V