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Real option analysis is determined as a more accurate method in evaluating investments in oil field development. Unlike another investment valuation method, real option analysis has considered the existence of uncertainty factor. Many studies discuss about the optimal strategy for investment in oil...
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| Format: | Final Project |
| Language: | Indonesia |
| Online Access: | https://digilib.itb.ac.id/gdl/view/24007 |
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| Institution: | Institut Teknologi Bandung |
| Language: | Indonesia |
| Summary: | Real option analysis is determined as a more accurate method in evaluating investments in oil field development. Unlike another investment valuation method, real option analysis has considered the existence of uncertainty factor. Many studies discuss about the optimal strategy for investment in oil field development for a single alternative of investment. For investments with two alternatives of investments, Dixit has defined the real option value by observing each alternative of investment separately. However, the accuracy of Dixit's model is questionable since there should be an intermediate waiting region for two alternatives of investments in which is optimal for the investor to wait and delay the investment. In this report, the intermediate waiting region problem is modeled in order to get the optimal investment strategy in oil field development for two alternatives of investment to get the optimal investment scale and timing. |
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