Publication
Title
Impact of probability distributions on real options valuation
Author
Abstract
This paper shows that the choice of the type of probability distribution is crucial in Real Options Analysis, because it could lead to different outcomes. This is illustrated by using the beta distribution and its special cases, such as the Program Evaluation and Review Technique (PERT) and uniform distribution to model parking garage demand uncertainty. These distributions are commonly used when there are no data available about the stochastic variable, i.e., demand uncertainty. Beta distributions are more flexible than the PERT and uniform distribution. One of the major challenges is the practicality of the beta distribution. A good solution to this challenge is provided by the PERT distribution, because of its ease-of-use and greater flexibility than the uniform distribution. In this research, a parking garage case example is used as the base case for modeling of the parking garage demand and is refined to allow for more generic, flexible, and practical applications of the model. The impact of different probability distributions is studied on the basis of an expansion option.
Language
English
Source (journal)
Journal of infrastructure systems / American Society of Civil Engineers. - New York
Publication
New York : 2016
ISSN
1076-0342
Volume/pages
22:3(2016), p. 1-13
Article Reference
04016005
ISI
000383159300003
Medium
E-only publicatie
Full text (Publisher's DOI)
Full text (open access)
UAntwerpen
Faculty/Department
Research group
Publication type
Subject
Affiliation
Publications with a UAntwerp address
External links
Web of Science
Record
Identification
Creation 21.03.2016
Last edited 09.07.2017
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