The valuation of real options in a hybrid environment

The aim of this paper is to present the possibilities and purposefulness of the application of fuzzy set theory to the valuation of real options. Owing to temporal fluctuations in the market, some input parameters in a model of a real option cannot always be expressed in a precise sense. Therefore, it is natural to consider them as a fuzzy numbers. Such an approach allows us to keep more information about the possible value of real options. A hybrid (fuzzy-stochastic) model for valuing a switch option is presented. Under these assumptions, the value of a switch option will be a fuzzy random set. This article assesses the incremental benefit of product switch options in steel plant projects. Such options are valued by Monte Carlo simulation and modelling the prices of and demand for steel products using fuzzy geometric Brownian motion. Finally, the value of a product switch option is defined by the upper and lower probability distribution function.

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Opracowanie rekordu w ramach umowy 509/P-DUN/2018 ze środków MNiSW przeznaczonych na działalność upowszechniającą naukę (2019).