Doctoral Thesis and M.Sc. Dissertation:
Abstracts and Files

Both doctoral thesis and masterial dissertation were about real options with focus in petroleum applications. This page is divided into two sections:

Doctoral Thesis

In this section I present my Doctoral Thesis in Production Engineering, Finance and Investment Analysis Area, from PUC-Rio. This thesis was defended and approved (without any restriction or correction) in January 2005, at PUC-Rio.
In addition to this thesis, the Doctor title was obtained because I was previously approved in the entire doctoral program: in the disciplines with average grade of 9.5 (maximum is of course 10) and in the qualifying exams (average grade was 9.9).

The thesis is in Portuguese (but the abstract below is in English) and the title is: "Opções Reais Híbridas com Aplicações em Petróleo" ("Hybrid Real Options with Applications in Petroleum").
I plan to convert this thesis to English in a book format (perhaps in 2007).

The main contribution from this doctoral thesis is related with technical (or private) uncertainty modeling. This kind of uncertainty is very important in petroleum applications, but the real options literature in this topic is too limited. I developed a theory on technical uncertainty and learning options based in the distribution of conditional expectation (named revelation distribution), where the conditioning is the new information that comes from the exercise of a learning option. The thesis proposed a measure of learning with very nice mathematical properties and also discusses revelation processes (sequences of revelation distributions) in general and Bernoulli revelation processes in particular (useful for applications on oil/gas exploration).
The thesis has 509 pages, 85 figures, 18 tables, 9 propositions, 7 lemmas, and 4 theorems.
I present below the abstract and download facilities for the thesis and the thesis defense file.

Abstract - Doctoral Thesis

This methodological and normative thesis extends the modern economic valuation theory of projects under uncertainty, known as real options theory, from the point of view of an oil company that optimizes the allocation of investment and resources. The real options theory is combined with other theories - so the name hybrid real options - in order to perform a more comprehensive and realistic analysis of complex problems that arises from petroleum industry. The two main combinations analyzed here are: (a) the combination of real options theory with game theory - real options games - to consider endogenously the strategic behavior of other firms, especially in the optimal stopping game with positive externalities known as war of attrition, as well as the possibility to change this game by a cooperative bargain game; and (b) the combination of real options theory with methods from probability theory and Bayesian statistical decision - Bayesian real options - generating a new way to model technical uncertainty of a project in dynamic real options models. These two combinations are re-combined in order to obtain an adequate solution that captures the value of information differences in non-cooperative and cooperative games. Important variables like exploratory chance factor, volume, and quality of a petroleum reserve, are modeled with the development of a new theory on revelation distribution and measures of learning. In a more concise way, are analyzed other hybrid real options, highlighting the combination of real options theory with the evolutionary computation theory - evolutionary real options - with great potential in complex applications of optimization under uncertainty. This method is exemplified with an application using the genetic algorithms to evolve the decision rule for optimal exercise of a real option.

real options, game theory, hybrid real options, real option games, Bayesian real options, measures of learning, investment under uncertainty.

Download the Doctoral Thesis and the Defense

The pdf file below is my thesis in one sigle file. The certificated thesis is divided into many files (each chapter is a file, etc.) and can also be downloaded from the PUC-Rio server (but I think the single file much more practical).

Download the doctoral thesis "Opções Reais Híbridas com Aplicações em Petróleo" in pdf file format: tese_doutor_marco_dias.pdf, with 4 MB (in Portuguese).

The pdf file below shows the slides from the thesis defense:

Download the doctoral thesis defense in pdf file format: defesa_tese_doutor_marco_dias.pdf, with 725 KB (in Portuguese).

Thesis Examining Board

The doctoral thesis was approved in January 2005 by the examining board without restrictions or corrections.

Master of Science Dissertation

Master of Science Dissertation Title:

Investimento sob Incerteza em Exploração & Produção de Petróleo (Investment under Uncertainty in Exploration & Production of Petroleum)

Dissertation Features:

Petroleum E&P Options


The investments in petroleum exploration and production (E&P) projects are frequently of medium/long term, with valuable embedded real options (managerial and/or operational flexibilities), with high degree of irreversibility, and under conditions of economic uncertainty (such as the oil prices, reserves prices, costs) and technical uncertainty (like the volumes in place). The traditional method of discounted cash flow, is very limited to deal with uncertainties and flexibilities, and results frequently in the wrong decisions. This thesis uses more modern techniques for the economic analysis, with a real scientific approach, by modelling the economic uncertainty as a stochastic process, and using dynamic optimization under uncertainty that considers the managerial freedom degree of a project. The modern theory of investment under uncertainty, also named real options theory, separates the value of investment opportunity from the decision rule, so that the latter maximizes the former. The dissertation also analyses the active management of both, the portfolio of projects and the portfolio of developed reserves. This thesis has three aims: (a) to find the "state-of-the-art" of the theory of investment analysis, through a large research work comprising more than 480 papers or books, that was studied or consulted, resulting in about 300 bibliographical references; (b) to present a simple model, reliable, flexible, and adequate to the main questions of investment decisions that the sponsoring company needs, specially the ones that arises from the post-monopoly times of the Brazilian petroleum sector when is important the variable time to expiration of the rights, using an interactive software in Excel, so that the users need only elementary knowledge of micro-computers; and (c) to build a channel that makes possible a continuous update of the modern economic techniques, through an Internet site that facilitates the scientific cooperation in this theme.

Dissertation Examining Board

The dissertation was approved (August/1996) by the examining board "...without restrictions. The examining board takes this opportunity to exalt the candidate for the performed work, highlighting its excellence and congratulates the candidate for such achievement with honor".

Doc Files from my M.Sc. Dissertation (1996) (in Portuguese)

After many people asking me to receive the files from my M.Sc. in 1996, I decide to let the files available for downloading.
However, I need to alert that the numbering of pages, chapters, itens, tables, figures, and all the indexes, were automatized with the master-doc tool of Word. However, the Word version at this time (Word 6) is now an old Word version so that the tool (master-document) has not been working in the newer Word versions.
In other words, the files are available but the numbering not.
I still recommend for the interested in my dissertation to use the universitary library intercambio service available in most universities, and ask the PUC-Rio Library to send a copy of my dissertation to your university (the advantage is that the indexes, number, etc, are perfect).

Anyway, the files can be read without other problems. The dissertation is divided into four files to downloading in compressed (.zip) format.

Download the compressed file:, with 192 KB.

Download the compressed file:, with 408 KB.

Download the compressed file:, with 221 KB.

Download the compressed file:, with 218 KB.


Forthcoming: The list of contents of the M.Sc Dissertation!

Back to Contents