Using real option analysis to value financial strategies

Essono, Fabrice Assoumou (2005-12)

Thesis (MBA)--Stellenbosch University, 2005.

Thesis

ENGLISH ABSTRACT: This study project focuses on the use of real options valuation in a tactical financing setting. The objective is to identify real option values in financial restructuring situations. These options are generated by the use of hybrid financial instruments such as warrants, preferred stocks and convertibles. In the analysis, it will be demonstrated that the binomial approach, a method commonly used in real options analysis, can be applied to draw a monetary value from specific financial transactions (e.g., leverage buyouts). When used optimally, the binomial approach provides a forceful insight into the dynamics of the transaction. The study recognises the possible impact of capital structure decisions in the analysis, but understates it to avoid complexity. The real options perspective encourages a conscious search for monetary benefits and thus improves the decision-making of managers involved in financial restructuring operations.

AFRIKAANSE OPSOMMING: Hierde werkstuk fokus op die gebruik van rieëIe opsie teorie om taktiese finansieringsbesluitneming te evalueer. Opsies word gegenereer deur die gebruik van hibridiese finansiele instrumente soos bestuursopsie-orders, voorkeuraandele en omskepbare instrumente. In hierdie studie word 'n oorsig oor die teorie soos dit in literatuur verskyn gegee, asook voorbeelde van finansiele herstrukturering om die waarde van die toepassing daarvan te illustreer. In hierdie studie word erkenning gegee aan die moontlike impak wat kapitaalstruktuur-besluitneming op die ontleding mag hê. Die impak hiervan word egter weens die kompleksiteit daarvan ignoreer. Nieteenstaande hierdie beperking, word besluitneming rakende finansiele herstrukturering verbeter deur die perspektief wat deur die rieëIe opsie-benadering verkry word, soos in hierdie werkstuk uitgewys word.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/50540
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