Datar–Mathews method for real option valuation

The Datar–Mathews Method (DM Method) is a method for real options valuation. The method provides an easy way to determine the real option value of a project simply by using the average of positive outcomes for the project. The method can be understood as an extension of the net present value (NPV) multi-scenario Monte Carlo model with an adjustment for risk aversion and economic decision-making. The method uses information that arises naturally in a standard discounted cash flow (DCF), or NPV, project financial valuation. It was created in 2000 by Vinay Datar, professor at Seattle University; and Scott H. Mathews, Technical Fellow at The Boeing Company.

Align: encenter
Caption: enFig. 2A Net profit present-value distribution; enFig. 2B Rational decision distribution; enFig. 2C Payoff distribution and option value
Comment: enThe Datar–Mathews Method (DM Method) is a method for real options valuation. The method provides an easy way to determine the real option value of a project simply by using the average of positive outcomes for the project. The method can be understood as an extension of the net present value (NPV) multi-scenario Monte Carlo model with an adjustment for risk aversion and economic decision-making. The method uses information that arises naturally in a standard discounted cash flow (DCF), or NPV, project financial valuation. It was created in 2000 by Vinay Datar, professor at Seattle University; and Scott H. Mathews, Technical Fellow at The Boeing Company.
Depiction
Direction: enhorizontal
Has abstract: enThe Datar–Mathews Method (DM Method) is a method for real options valuation. The method provides an easy way to determine the real option value of a project simply by using the average of positive outcomes for the project. The method can be understood as an extension of the net present value (NPV) multi-scenario Monte Carlo model with an adjustment for risk aversion and economic decision-making. The method uses information that arises naturally in a standard discounted cash flow (DCF), or NPV, project financial valuation. It was created in 2000 by Vinay Datar, professor at Seattle University; and Scott H. Mathews, Technical Fellow at The Boeing Company.
Hypernym: Method
Image: enDatar_Mathews_Real_Option_Method_Wikipedia_Fig_2A_Net_Profit_Present_Value_Distribution.jpg; enDatar_Mathews_Real_Option_Method_Wikipedia_Fig_2B_Rational_Decision_Distribution.jpg; enDatar_Mathews_Real_Option_Method_Wikipedia_Fig_2C_Payoff_Distribution_and_Option_Value.jpg
Is primary topic of: Datar–Mathews method for real option valuation
Label: enDatar–Mathews method for real option valuation
Link from a Wikipage to another Wikipage: Advances in Decision Sciences; Airfare; Ambiguity aversion; Behavioral sciences; Beta distribution; Bias; Bias blind spot; Binomial options pricing model; Black-Scholes; Black–Scholes; Black–Scholes model; Boeing Technical Fellowship; Category:Financial models; Category:Monte Carlo methods in finance; Category:Real options; Cognitive bias; Compound option; Conditional expectation; Conditional probability distribution; Cost of goods sold; Cumulative distribution function; Daniel Kahneman; Decision tree; Demand; Demand curve; Discounted cash flow; Expected value; Experience curve effects; File:Datar Mathews Real Option Method Wikipedia Fig 1 Typical Project Cash Flow with Uncertainty.jpg; File:Demand Price and Cost Curves.jpg; File:Differentiated Market.png; File:Fig. 4 Concept of conditional probability distribution and mean of tail.png; File:Fig. 5 Time differentiated discounting appears to shift X relative to S.png; File:Fig. 7 Triangular conditional probability distribution.png; File:Fig 3 Comparison of Black Scholes and Datar-Mathews frameworks.png; File:Low probability, high value outcomes.jpg; File:Operating Profits Graph.jpg; File:Optimal Ranges to Maximize Profitability.jpg; File:Option value v S0-X0 - UR constant.png; File:Range Option showing triangular distribution V2.png; File:Ratio of areas is proportional to the probability.png; Fundamental attribution error; Fuzzy logic; Fuzzy pay-off method for real option valuation; Guesstimate; Innovation; Introspection illusion; Lappeenranta University of Technology; Law of demand; List of probability distributions; Lognormal distribution; Log-normal distribution; Loss aversion; Minimum acceptable rate of return; Monte Carlo methods for option pricing; Monte Carlo methods in finance; Monte Carlo model; Monte-Carlo simulation; Naïve realism (psychology); Net present value; Operating profit; Present value; Probability distribution; Product differentiation; Proportionality (mathematics); Prospect theory; Random variable; Ratio; Rationality; Real options valuation; Regret (decision theory); Required rate of return; Risk-averse; Risk aversion; Risk aversion (psychology); Risk-neutral; Sampling (statistics); Seattle University; Standard normal distribution; Standard normal table; Strike price; The Boeing Company; Three-point estimation; Triangular distribution; Truncated distribution; Uniform distribution (continuous); Volatility (finance)
SameAs: 4irT6; m.0gyt6qv; Q5227489
Subject: Category:Financial models; Category:Monte Carlo methods in finance; Category:Real options
Thumbnail
TotalWidth: 690
WasDerivedFrom: Datar–Mathews method for real option valuation?oldid=1114056087&ns=0
WikiPageLength: 53420
Wikipage page ID: 32321546
Wikipage revision ID: 1114056087
WikiPageUsesTemplate: Template:Multiple image; Template:Reflist

Datar–Mathews method for real option valuation

Backlinks

About

Resources

Support

Follow us