Assessing the Impact of XML/EDI with Real Option Valuation

von Dr. Shermin Voshmgir

vorherige Seite | zur Übersichtsseite | folgende Seite

Statistik und Sichtungsnachweis dieser Seite findet sich am Artikelende

[1.] Svr/Fragment 083 01 - Diskussion
Zuletzt bearbeitet: 2020-01-19 22:17:17 [[Benutzer:|]]
Economist 1999, Fragment, Gesichtet, SMWFragment, Schutzlevel sysop, Svr, Verschleierung

Typus
Verschleierung
Bearbeiter
Hindemith
Gesichtet
Yes.png
Untersuchte Arbeit:
Seite: 83, Zeilen: 1-21, 101
Quelle: Economist 1999
Seite(n): online, Zeilen: 0
Getting the cash flow projections right (or even close) is staggeringly difficult. But it is even trickier to choose the correct discount rate. Conceptually, that rate is the opportunity cost of not investing in another project of similar systematic risk1. So the higher a project's risk, the higher its discount rate and the lower its NPV. The CAPM (Capital Asset Pricing Model) often spits out negative NPVs for many of the most exciting strategic opportunities.

The main reason for this shortcoming is that the model can use only information that is already known. For highly strategic investments that information is typically not much, and the resulting uncertainty tends to be reflected in an excessive discount rate. Combining an NPV calculation with decision trees (which assign numerical probabilities to various possible outcomes) may help, but not much. For each branch of the tree, the analyst still has to pick and apply an appropriate discount rate, and that of course was the problem in the first place. More fundamentally, the flaw in the CAPM is that it implicitly assumes that when firms buy new assets, they hold these passively for the life of the project. But they do not. Instead, they employ managers precisely in order to react to events as they unfold. Obviously, this managerial flexibility must be worth something.

As with financial options, the longer the option lasts before it expires and the more volatile the price of the underlying asset the more the option is worth. This is in sharp contrast to the NPV, which deals harshly with both long time horizons and uncertainty.


1 Systematic risk is referred to risk that, in a large portfolio, cannot be diversified away.

Getting the cash-flow projections right (or even close) is staggeringly difficult. But it is even trickier to choose the correct discount rate. Conceptually, that rate is the opportunity cost of not investing in another project of similar systematic risk (ie, risk that, in a large portfolio, cannot be diversified away). So the higher a project's risk, the higher its discount rate and the lower its NPV. But in practice, setting discount rates at the right level is almost impossible. The CAPM often spits out negative NPVs for many of the most exciting strategic opportunities.

The main reason for this shortcoming is that the model can use only information that is already known. That is typically not much, and the resulting uncertainty tends to be reflected in an excessive discount rate. Combining an NPV calculation with decision trees (which assign numerical probabilities to various possible outcomes) may help, but not much. For each branch of the tree, the analyst still has to pick and apply an appropriate discount rate, and that of course was the problem in the first place. More fundamentally, the flaw in the CAPM is that it implicitly assumes that when firms buy new assets, they hold these passively for the life of the project. But they do not. Instead, they employ managers precisely in order to react to events as they unfold. Obviously, this managerial flexibility must be worth something.

[...]

[…] As with financial options, the longer the option lasts before it expires and the more volatile the price of the underlying asset — in this case, oil — the more the option is worth. This is in sharp contrast to the CAPM, which deals harshly with both long time horizons and uncertainty.

Anmerkungen

The source is not given.

Note that "NPV" = "Net Present Value" is a different concept than "CAPM" = "Capital Asset Pricing Model".

Sichter
(Hindemith) Schumann



vorherige Seite | zur Übersichtsseite | folgende Seite
Letzte Bearbeitung dieser Seite: durch Benutzer:Schumann, Zeitstempel: 20200119221825
Nutzung von Community-Inhalten gemäß CC-BY-SA, sofern nicht anders angegeben.
… weitere Daten zur Seite „Svr/083
Hindemith +
(Hindemith) Schumann +