Decision Options: The Art and Science of Making Decisions

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CRC Press, Jun 1, 2009 - Mathematics - 316 pages
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Although uncertainty and flexibility are important attributes that drive the value of an investment, they are seldom systematically considered in traditional financial analysis. Through theory and case studies, Decision Options: The Art and Science of Making Decisions details how uncertainty and flexibility can be evaluated to assist in making better investment decisions in companies. Harnessing the author’s own software technology, the book supplies a tool set that enables the incorporation of uncertainty and flexibility in investment decisions up front without being too complex.

After a qualitative introduction to decision options, the author covers private and market risks, including how risks relate to decisions and the use of stochastic processes to represent risks. He then presents self-standing options, such as financial options and options pricing theory; describes how decision options are different from single-standing financial options; and deals with a special case of decision options in pricing employee stock options. The next several chapters focus on various case studies of practical applications of decision options. The book also explores common misperceptions around the term real options and the impediments that currently exist in large companies for the systematic practice of decision options.

Providing rigorous methods to use when making decisions, this book helps readers reduce the time and effort needed to reach decisions and build consensus, improve decision fidelity and communication, and enhance the value of their enterprise.

 

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Contents

Chapter 1 Introduction
1
Chapter 2 Decisions Options and Decision Options
3
Chapter 3 Decisions as Predetermined Outcomes Options and Risks
15
Chapter 4 Private Risks and Probabilities
21
Chapter 5 Market Risks and Stochastic Processes
29
Chapter 6 SelfStanding Options and Pricing of Options
39
Chapter 7 Pricing of Decision Options
59
Chapter 8 Employee Stock Options as Decision Options
79
Chapter 11 Case Studies in Commodities
207
Chapter 12 Case Studies in Financial Services
259
Chapter 13 Misperceptions Regarding Real Options
281
Chapter 14 Challenges to Decision Options Implementation and Possible Remedies
287
Chapter 15 Past Present and Future
295
References
303
Index
305
Back cover
309

Chapter 9 Case Studies in Life Sciences
89
Chapter 10 Case Studies in Technology and Manufacturing
171

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About the author (2009)

Gill Eapen is the founder and managing principal of Decision Options, LLC, a boutique advisory services company. He developed Decision Options Technology, a software platform that allows modeling of complex decision problems and assets to improve decision making, risk management, and portfolio maximization. He also designed Decision Options Equity Research, an automated analysis and trading system for publicly traded securities. Eapen holds graduate degrees from the University of Chicago and Northwestern University and an undergraduate degree from the Indian Institute of Technology.

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