Real Options: Managing Strategic Investment in an Uncertain World

by Martha Amram and Nalin Kulatilaka

Book Overview

In capital investing, as in life, you always have options. In today's extremely turbulent world, managers recognize how risky the most valuable investment opportunities often are, and how useful a flexible strategy can be. That's why they want to know all their options. Yet many current financial assessment tools fail to identify what investors can do to capitalize on future uncertain events. Martha Amram and Nalin Kulatilaka suggest a smarter new...

• Format: Hardcover
• Language: English
• ISBN: 0875848451
• ISBN13: 9780875848457
• Release Date: December 1998
• Publisher: Oxford University Press, USA
• Length: 246 Pages
• Weight: 1.32 lbs.
• Dimensions: 1.0" x 6.4" x 9.6"

Customer Reviews

Best user friendly treaty on Real Options.

This is an excellent book on the subject. It is the most readable and user friendly book on the market on Real Options. You don't need to understand Greek to tackle this book unlike the other ones. The author clearly explains the Black Scholes option model, the foundation of option valuation. They then illustrate how this model can be applied to non option business investment opportunities. The authors establish a real option framework to handle your business decision. It explores many practical cases in detail, so you get a good feeling for this approach. The authors also flesh out when it is better to use Black Scholes vs. Monte Carlo simulation in order to make a business decision.

ECommerce needs a Real Options investment approach!

Many investments in ECommerce have been postponed because management required facts about the future - which do not exist - to fit into their ROI models and mindsets. Well the Real-Options approach helps managers create business cases using the market which will validate action. We have been postponing the future, particularly in ECommerce investments for too long and this is a very important new tool in the arsenal for action! So now there will be few excuses to postpone investments today which create options for tomorrow. If you don't sow you can't expect to reap the harvest.

You must read before any investment decision

The model presented in the book is really useful and gave me a different perspective on how to analyze investments in real assets.Moreover, this approach is simple to apply in any kind of business

Great General Managers Guide to Real Options

This is the first Real Options book that targets the general management audience and, subsequently, is not bursting at the seams with daunting calculations and formulas that typically turn-off even the most enthusiastic readers. It recognizes that there is just as much power in developing a 'real options way of thinking' as there is in understanding the mechanics of the economic theory. Having worked for several years in product development where traditional financial treatments like NPV are extremely limited, I cannot emphasize enough the power of these frameworks. I would highly recommend this book to people who are similarly frustrated by their current managmement tools which fail to capture the nuances of the strategic decisions they face. Through its structure and frequent case examples, the book makes real options much more approachable. This increases the likelihood that decisions will actually be influenced and enhanced even in the face of significant uncertainty.

A roadmap for decision-makers

I face difficult decisions every day -- the underlying information on which to base any of my decisions is often incomplete or uncertain. Some such decisions, e.g. structuring the terms of a licensing agreement, often draw upon industry-standard metrics of evaluation... but in reality both sides are looking into a crystal ball, weighing our risks against the possibility of success. It is an uncomfortable state; blunders can be costly -- as can be lost opportunities. Amram and Kulatilaka have put together a masterful roadmap for evaluating uncertainty -- one which can even clarify "gut-feelings"."Real Options: Managing Strategic Investment in an Uncertain World" was particularly easy to read because of the many examples provided. They wrote this as a handbook for decision-makers, the managers and licensing executives who up to their eyeballs in choices, negotiations, and deals -- its not just a textbook for economics graduate students.Interestingly, I found the Real Options strategies applied to decision-making outside the envelope of license negotiations. I use this strategy to value my investment of time and resources in a variety of projects where uncertainty often seems to be the overiding variable. Yes, risk and uncertainty are part of real life -- they sure can make your stomach hurt. Real Options can help you find your path and ease the stomach-pain of choosing.