What's New?

The April 2008 Update

The main news is that the next real options conference (ROC) will be in Rio, at Hotel Pestana (Copacabana beach). PUC-Rio is co-organizing with the Real Options Group this "ROC in Rio".
Marco A.G. Dias (me), by the Departamento de Engenharia Industrial (Industrial Engineering Department) and Luiz Brandão, by the Instituto de Administração e Gerência (Business and Management Institute) are the main responsible by the local arrangements.
The Keynote Speaker will be Professor Tom Copeland. The Brazilian pioneer O. Tourinho (with his doctoral thesis at Berkeley, 1979) will address the Luncheon Guest Lecture.

See the official event website at Real Options Group Conferences Webpage.

See also the PUC-Rio Local Conference Website, built by the IAG/PUC-Rio, with a lot of useful information, like VISA requirements (for some countries), tourism information and accomodation options.

Download Academic Conference Program by clicking here (pdf) or by clicking here (Word for Windows doc).

Download Managerial Conference Program by clicking here (pdf) or by clicking here (Word for Windows doc).

Due to my two (sometimes three) jobs at Petrobras (full time) and PUC-Rio (graduate courses and MBA in the evenings), I have been experimenting a lack of time to update properly my website in the last four years.
But I uploaded some courses materials (in Portuguese) from my graduate courses and some presentations from conferences and seminars.

• In the webpage IND2072, Análise de Investimentos com Opções Reais, tthere are materials from my graduate course on real options at Industrial Engineering Department (in Portuguese). This course has been offered yearly since 2005.

• In the webpage ELE2005, Análise Estratégica de Investimentos e de Decisões com Teoria dos Jogos e Jogos de Opções Reais, there are materials from my graduate course on game theory and real options games (combination of real options and game theory) at Electric Engineering Department (in Portuguese). This course has been offered yearly since 2006.

• In the webpage Real Options Online Multimedia Material, there are materials from some more recent conferences and seminars: ROC in Montreal 2004, in Paris 2005, in New York 2006, in Berkeley 2007, and seminars for mathematicians at PUC-Rio (2007) and IMPA (2007). Some presentations are in English and others in Portuguese.

• In the webpage Doctoral Thesis and M.Sc. Dissertation: Abstracts and Files, I put my doctoral thesis file and the slides from my thesis defense (files in Portuguese, but the I put a description and the abstract in English).

IMPORTANT: I received many new contributions in the last years. I need time to prepare the webpages with these contributions. I promised to put these material online as soon as possible. Sorry for the delay.
In addition, I started new webpages with real options materials (on American options; on technical uncertainty modeling and learning measures, etc.), but again I need more time to finish these new additions.

The January 2004 Update

In this update I put some new materials listed below. This update has less new materials than the previous one because I spent most of my free time to standardize this website according the new PUC-Rio webserver standard (a webmaster demand).
In the next update, after my doctoral thesis defense (this year), a larger update will be prepared.
However, there are interesting new materials in the January 2004 update, including new contributions. See the list below.

• The webpage on Simulation of Stochastic Processes was improved with additional explanations and equations. For example, the mean-reversion Model 2 (Schwartz) has a new format using the long run future price which the simulation converges instead the long run equilibrium level.
  In addition, a new (non-protected) Excel spreadsheet on mean-reversion simulation (Model 1) is available to download.

• In the webpage Real Options Online Multimedia Material, are available three new materials to download.
  * Download the Powerpoint file from the seminar Real Options in Real Life, presented in May 5th 2003 at MIT, Sloan School of Management, Cambridge, USA.
  * Download the files (paper and presentation) from the 7th Annual International Conference on Real Options, Washington, USA, July 2003
  * Download the presentation file from my seminar at UFRJ (Federal University of Rio de Janeiro), Rio, Brazil, in September 16th 2003 (in Portuguese).
  

• New contributions in the Contributions Page:
  
  * Leo Lundquist, M.Sc., shares his monograph in Economics (see section II Special Contributions) in English: Evaluating Offshore Petroleum Leases Using Real Option Theory - An Application to the Central Mexican Gulf. Tutored by Professor Mats Persson, from Stockholm University, Sweden.
  
  * Viktor Nigri Moszkowicz shares his M.Sc. Dissertation (abstract in English and dissertation in Portuguese) Validation of the Project Valuation Criterion Using the Real Options Theory: Brazilian Oilfields E&P, Considering Prices as Geometric Brownian Motion ("Validação do Critério de Avaliação de Projetos Utilizando a Teoria das Opções Reais: E&P de Campos de Petróleo Nacionais, Supondo Preços como Movimento Geométrico Browniano"). Advised by Professor José Paulo Teixeira from PUC-Rio, Dept. of Industrial Engineering.
  
  * Regina Caspari Monteiro shares her M.Sc. Dissertation (abstract in English and dissertation in Portuguese) "Contributions from the Approach of Real Options Valuation in High Volatility Economic Environment: An Emphasis in the Latin-American Scenario" ("Contribuições da Abordagem de Avaliação de Opções Reais em Ambientes Econômicos de Grande Volatilidade - Uma Ênfase no Cenário Latino-Americano"). Advised by Professor Alexandre Assaf Neto from USP (Universidade de São Paulo), Faculty of Economics, Administration, and Accountancy.
  
  * Elieber Mateus dos Santos and Edson de Oliveira Pamplona share two articles presented in 2002 and 2003 at the 2^nd and 3^rd Encontro Brasileiro de Finanças ("Brazilian Finance Meeting"), both in Portuguese: "Teoria das Opções Reais: Aplicação em Pesquisa e Desenvolvimento (P&D)" ("Theory of Real Options: Application in Research and Development (R&D)") and "Qual o Valor de um Projeto de Pesquisa? Uma Comparação Entre os Métodos de Opções Reais, Árvore de Decisão e Vpl Tradicional na Determinação do Valor de um Projeto Real de Pesquisa e Desenvolvimento" ("What Is the Value of a Research Project? A Comparison Between Real Options, Decision Trees, and the traditional Npv to determination of the real research and development project value").
  
  

• See in Visual FAQ's on Real Options , two new FAQs on technical uncertainty and on quasi-Monte Carlo approach.

• See in Bibliographical Resources, section "Bibliographical Lists with Comments", a new webpage with coments, ToC, etc., on the recent book edited by Anne Ku entitled "Risk and Flexibility in Electricity".
  In addition, the reader can download or see my bibliography with about 200 new additions since the last update.

The March 2003 Update

• In the webpage Option Games Models, are available three new online papers with three Excel spreadsheets to download. These spreadsheets comprises the "Option Games Suite", a software pack to solve option games models. In addition, a new webpage with a large bibliographical list on option games.
  The three online papers (with spreadsheets) are:
  * Symmetrical Duopoly under Uncertainty - The Huisman & Kort Model;
  * Asymmetrical Duopoly under Uncertainty - The Extended Joaquin & Buttler Model; and
  * Oligopoly under Uncertainty - The Grenadier Model.
  

• In the webpage Real Options Online Multimedia Material, are available many new material to download, from my international presentations during 2002.
  * Download the files from the seminar Real Options in Real Life, presented May 2nd 2002 at MIT, Sloan School of Management.
  * Download the files from the International Real Option Workshop, May 6-8 2002 - Turku, Finland.
  * Download the files from the 6th Annual International Conference on Real Options, Cyprus, July 2002
  * Download the files from the SPE Applied Technology Workshop, Rio de Janeiro, August 2002
  * Download the files from the Workshop on Real Options and Energy, Mexico City, September 2002.

• A new webpage with List of Excel Spreadsheets Available To Download. It is linked at Real Options Software Webpage.
  This list starts with 15 topics. Each topic includes links to direct download, a short description, the main related webpage, software type (freeware or shareware), if has VBA code or not, and if the file has any limitation compared with the registered version (when applicable).

• New contributions in the Contributions Page:
  * Charlie Grafström & Leo Lundquist share their M.Sc. Dissertation in Financial Economics: Real Option Valuation vs. DCF Valuation - An application to a North Sea Oilfield. Tutored by Professor Lars Vinell, from Stockholm University - School of Business, Sweden.
  * Jose Dapena, from Universidad del CEMA, Argentina, presents the paper On the Property of Real Options and the Assets that Give Rise to Them. He focuses "real options stemming from the indirect property of complementary assets";
  * Elieber Mateus dos Santos shares his M.Sc. Dissertation (abstract in English and dissertation in Portuguese) A Study on Real Options Theory Applied to Investment Analysis of Research and Development Projects (R&D) ("Um Estudo Sobre a Teoria das Opções Reais Aplicada à Análise de Investimentos em Projetos de Pesquisa e Desenvolvimento (P&D)"). Advised by Prof. Pamplona, from Escola Federal de Engenharia de Itajubá (Minas Gerais, Brazil);
  * Luke J. Sparvero, from University of Texas at Arlington, offers Matlab Files to solve some problems from Dixit & Pindyck's textbook.
  

• A new webpage on payoff (NPV) and real options models for petroleum projects, discussing linear and nonlinear models for the underlying project value V in function of the commodity price P. There are charts, proofs, and spreadsheets to download.
  In this webpage are described and available to download the two new variants of the software Timing, for The Business Model and The Rigid Cash-Flow Model.

• The webpage on Technical Uncertainty, Investment in Information, Information Revelation, and Revelation Distribution was updated in more than 70%, thanks to my new paper presented in many 2002 conferences. Download also the latest version of the related paper.
  In the Real Options Software Webpage the updated version of the shareware Excel spreadsheet Timing with Dynamic Value of Information, which combines technical uncertainties revealed by the investment in information with the market uncertainty from the basic commodity price, into a dynamic framework. It applies the methodology of technical uncertainty using revelation distributions into a dynamic real options model using Monte Carlo simulation.

• The webpage First Hitting Time and Expected Discount Factor is practically a new webpage because the previous material on first hitting time was totally reformed, corrected, and expanded with new sections and insights. Some results are presented for the first time (at the best of my knowledge). A new freeware spreadsheet is available to download.

• In the webpage Monte Carlo Simulation of Stochastic Processes there is a new section on Discretization Accuracy of the Mean-Reversion.
  There are two new spreadsheets to download there, one simulating and checking the discretization accuracy of mean-reversion, and the other one simulating sample paths for mean-reversion with jumps. .

• In the page of Bibliographical Resources, the file with the bibliography was enlarged with more than 300 new entries, reaching more than 2,100 bibliographical items!
  See also the new real options book from Risk Books: Real Options and Energy Management.
  See also the new option games bibliography webpage.

• Updates on the pages of links, mainly in Real Options Links webpage, now with about 200 links organized by sections. Some update in the Financial, Economics and Other Links webpage.

• Small to medium updates in many other pages. For example, the page on Quasi-Monte Carlo Simulation, some improvements like the ones in the topic on regular grid.

The December 2001 Update

• A new and large section discussing the Quasi-Monte Carlo Simulation approach, with animations and Excel files to download. The webpage on Real Options with Monte Carlo Simulation has other new features such as the Monte Carlo and Quasi-Monte Carlo internet links .

• In the Real Options Software Webpage two major news. First the new features of the interactive spreadsheet Timing, which now uses a more accurate analytic approximation for American options, both the real option value and the optimal threshold are user-defined Excel function (using VBA), and the expected time for the real option exercise is calculated using both traditional Monte Carlo and hybrid quasi-Monte Carlo simulation.
  The other news is the new Excel spreadsheet Timing with Dynamic Value of Information, which combines technical uncertainties revealed by the investment in information with the market uncertainty from the basic commodity price, into a dynamic framework that considers both the real option expiration time (to develop an oilfield) and the time to learn.

• Five new contributions in the Contributions Page (3 in English and 2 in Portuguese):
  Håkan Jankensgård presents a very interesting monograph on Option-Games (combination of real option with game theory) in the Bachelor's Thesis named The Option to Defer - Modeling the Opportunity Cost under Competition;
  Katia Rocha presents a paper on the Energy regulation using real options;
  Katia Rocha presents a new paper on the Amazon concessions, this time using mean-reversion for the timber price, and in addition is available the Powerpoint file from her presentation at UCLA in July 2001; and
  Luiz Eduardo Brandão presents An Instructor's Manual for the Dixit & Pindyck's Investment under Uncertainty textbook (chapters 2 to 8). The manual is in Portuguese, with translation of the chapters, some proofs not developed by the authors, and discussion of many points for better understanding. It is a must for students and teachers using this classic book; and
  Juliana Marreco presents the real options paper (in Portuguese) Otimização Dinâmica sob Condição de Incerteza na Produção de Petróleo("Dynamic Optimization under Uncertainty in the Petroleum Production").

• In the webpage of Petroleum Models see the online paper named Real Options in Upstream Petroleum: Overview of Models and Applications, with discussion of the main real options literature in this area and some practical tips for real options applications in petroleum
  See also the new webpage of Technical Uncertainty, Information Revelation and Revelation Distribution, which substitute an older page on technical uncertainty, presenting a simple example to understand this complex theme, among other features.

• A new section discussing the Monte Carlo Simulation of Stochastic Processes, linked with the webpage on Real Options with Monte Carlo Simulation, shows some ways to simulate stochastic processes like mean-reversion models and mean-reversion with jumps (Poisson process), in addition to the more known geometric Brownian motion.

• In the Real Options Online Multimedia Material, four new materials are available to download (two in English and two in Portuguese). First the Powerpoint file from my presentation at the 5th Annual International Conference on Real Options, July 2001, University of California at Los Angeles (UCLA). The second is the paper Selection of Alternatives of Investment in Information for Oilfield Development Using Evolutionary Real Options Approach, presented in the same conference. The third is a short course on real options I taught at PUC-Rio (July, 2001) for MBA students, with two Powerpoint files, but available only in Portuguese. The fourth are the doc files from my M.Sc. dissertation in 1996.

• Updates on the pages of links, mainly in Real Options Links webpage, now with more than 170 links, and some update in the Financial, Economics and Other Links webpage.

• In the page of Bibliographical Resources, the file with the bibliography was enlarged with more than 400 new entries!

• In some pages I made some few corrections or small improvements.
  In addition, by running a spelling tool in many pages of this website, I fixed many (and unbelievable) errors and typos. I know that many spelling and grammatical errors remain in this website, and I'll be grateful if the reader point me any of these errors.

Fifth Anniversary Update (October 2000)

• Special new webpage celebrating the Fifth Anniversary of the Real Options in Petroleum Website: Visual FAQs on Real Options.

• In the Real Options Online Multimedia Material, new materials are available to download: Powerpoint presentations from conferences in New York (December 1999), New Orleans (March 2000), and Chicago (September 2000).
  In this page see also a research paper on evolutionary computation applied to real options.

• Four new contributions in the Contributions Page:
  Katia Rocha presents a paper on the Amazon concessions using real options;
  Katia Rocha presents an online article: Numerical Techniques for Real Options;
  Alessandro Castro presents his M.Sc. Dissertation on electrical generation valuation with real options; and
  Jose Dapena presents a paper on Valuation of Companies with Growth Opportunities.

• New webpage: Real Options with Monte Carlo Simulation, including the research report Real Options with Monte Carlo + Genetic Algorithms and a bibliographical section with topics like Monte Carlo and American Options, Quasi-Monte Carlo Techniques, and Books and Classic Papers.

• In the webpage of petroleum models see new page on technical uncertainty and information dynamics.

• See the new topic Stochastic Processes and Seasonality in the page on stochastic processes with cycles.

• The bibliography page: the bibliography file with more than 100 new entries since the last update, this file has about 1,300 bibliographical entries. In Html version or download the compressed Word for Windows file.

• Updates on the pages of links, mainly in real options links webpage and some in the financial economics webpage.

• Some additions and improvements (and even typo corrections) in the section of stochastic processes, and more!

October 1999 Update News

• See in the contributions page: Volatility, Flexibility and the Multinational Enterprise, the Ph.D. Dissertation of Dr. Arun Muralidhar, from MIT! See a special page with abstracts, full text to download of two papers (chapters from the dissertation) and some special highlights online.
• The section of Stochastic Processes was expanded, corrected, and updated. Several new pictures and new topics. Comprises 8 pages, focusing stochastic processes from a real options point of view.
• The page of Real Options Links, dedicated only for sites with real options materials, is updated and with all links revised. I add some new real options links in the last three months such as the website of Prof. Hakan Erdogmus, the website of Prof. William Perraudin, real options website by U. Hommel, and others.
  The update of November 07, 1999, crossed the one hundred links mark!
• The bibliography page: the bibliography file with more than 50 new entries since the last update, this file has near 1,100 bibliographical entries. In Html version or download the compressed Word for Windows file.
• The page of Financial and Economics and Others Links has some new links, new section (consultants and software) and some revision in the links.
  There are others small changes in some others pages.
• See also the large update of June 1999, with lots of new materials.

June 1999 Update News

• New website model page Concessions with Extendible Options, using a mix mean-reversion with jumps process to model oil prices.
  This page includes description of the model, sensitivity an analysis, and more.
• New website section: The Real Options Software Webpage, that show spreadsheets derived from the basic version of Timing (Timing with two stochastic variables and a version for the case of the option to switch use); Mathcad application for hysteresis model; and the graphical interface of a C++ program for extendible options.
• New website section: The Option-Game Webpage, that shows beside the model presented in the 1997 SPE Conference and bibliographical reviews, new features like a duopoly model (extended Dixit & Pindyck model) and strategic thinking of options (this forthcoming).
• The new webpage on Stochastic Processes, that shows several different models for oil prices uncertainty, including the new mean-reversion with jumps model.
• In the webpage of petroleum models see two new features: the concept of economic quality of a reserve with application for mutually exclusive projects, and model for petroleum concessions with extendible options, using both the traditional geometric Brownian motion and the more realist mean-reversion with jumps to model oil prices.
• In the Real Options Online Multimedia Material, several new materials, like Powerpoint presentations, paper in Acrobat (pdf) and Word, and more.
• See the new Real Options Links page, dedicated only for sites with real options materials, which has some new real options links such as the Real Options Group (site of the 3rd Annual International Conference on Real Options), Real Options site from Amram & Kulatilaka, with several informations of interest, including their new book on real options; the Real Options and Exotic Options, new website of Laurent Gauthier; and others new links.
• See in Financial and Economics and Others Links page, that joint the older "Financial/Economic links" and "Petroleum, Search, and Others Selected Links", except the real options links, now with a exclusive webpage. See great new links mainly for economic/finance sections, such as the Rubinstein's website, the site with downloadable papers by Gabriele Susinno & Marco Rigoand, and others.
• The bibliography file: with more than 150 new entries since the last update, this file has around 1,000 bibliographical entries.

February 1998 Update News

• Timing, an Excel application for American call option on dividend paying asset with focus on real options. Explore the analogy real options with this type of financial option. The program calculates option value, threshold (early exercise) and even the expected first hitting time for this American option. Presents also two charts which are dynamically updated with parameters changes.
• See a theoretical and practical discussion about expected first hitting time.
• sensitivity analysis for American call option using several (static) charts and also many animated charts! See the Multimedia page
• The option-game model slides presentation is now online! Click here to go without intermediary pages!
• New page: Bibliographical Review. This issue: Option-Games.
• The petroleum options page has a new format and a new material is also included.
• See in the contributions page: New contribution from Sweden: Abstract of the M.Sc. dissertation by Gunnar Kallberg and Peter Laurin on R&D investment, with link to request the full text.
  Update of some e-mails.
• Financial/Economics links page with several updates. See for example: in the real options section the link to the new real options site in Germany; in the general resources section, a link to the Scout Report for Business and Economics.
• Others links page with important updates. See the new section of mathematics, including links to pages with Java applets about Brownian motion.
• About author page update (curriculum, etc.) now including the description and program of the new PUC course on capital budgeting under uncertainty (more than 50% on real options).
• The bibliography file: with more than 100 new entries since the last update.

April/May 97 Update News

• The slides of a paper on option-game model for exploration and production of petroleum (in Powerpoint for Windows 3.1 and in Powerpoint for Windows 95) presented at SPE Hydrocarbon Economics and Evaluation Symposium held on Dallas, TX (USA), March 18th, 1997.
  Note: SPE means Society of Petroleum Engineers.
• Update of the bibliography file (in Word for Windows format) with more than 80 new entries. You can download that file in the page of the bibliography list;
• Important update and additions in the "financial/economic links" page, mainly in Financial derivatives (see for example the nice "Excel Movies" in the Prof. Craig W. Holden's home page) and in Real Options (see for example Prof. Damodaran Excel spreadsheets, the almost complete list of Prof. Avinash Dixit's papers and books, Decision Theory course of Jim MacKay (Texaco), and real options articles of some countries).
• Some update of the "others links" page

December 96/ January 97 Update News

• New The Powerpoint presentation of the author's dissertation defense, in English! with 121 slides.
  Note: The Portuguese version is available in this site since September/96.
• Update of the bibliography file (in Word for Windows format) with more than 30 new entries. You can download in the page of the bibliography list;

November/96 Update News

• New contribution of Prof. Flatto in the "Contributions Page": Online paper about real options approach (introductory text). The contribution page also was reformulated with a contents link for ease of surfing;
• Update of Beliossi's Paper (version of September/96) in the "Contributions Page";
• Update of the bibliography file (in Word for Windows format) with more than 40 new entries. You can download in the page of the bibliography list;
• Several new links in the "Financial and Economics Selected Links" page, mainly in the item of "Real Options Links". See, for example, real options site in the Netherlands, the site of Prof. J. Flatto (USA), and the site of Ph.D. candidate T. Hoff (USA), both with working papers; and
• Some update in the "Petroleum, Search and Others Selected Links" page, mainly with new search machines.