Real Option Thinking: A journey through time.
Engineering Honours Degree 2009
University of Adelaide
Every year many papers are published in the SPE involving real options, whether a new strategy to value a project or perhaps an in-depth analysis of how real options are changing the valuation and outcomes of projects.
From the many published papers the fundamental acceptance of real option thinking has been reached but trying to take it the next step by creating a generally accepted valuation technique has been met with challenges.
This paper has been split into two stages, the first goes through the background of options primarily from the financial world, and looks into aspects that affect the transformation into real option thinking.
The second part is a critical analysis of purposed models and implementations in a chronological or-der along with applications on how real options can value petroleum projects. It looks at the growth in interest and how some key papers have defined the shape and direction of real option thinking.