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- Not a new theory,but a new way of solving Keynes's theory
- real options
- Not For The Faint-Hearted
- dealing with uncertainty
- State of the art -- but math is a required subject
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Investment under Uncertainty
Avinash K. Dixit , and
Robert S. Pindyck
Manufacturer: Princeton University Press
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Real Options and Investment under Uncertainty: Classical Readings and Recent Contributions
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Real Options, Revised Edition: A Practitioner's Guide
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Real Options: Managerial Flexibility and Strategy in Resource Allocation
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Strategic Investment: Real Options and Games
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Economic Growth, 2nd Edition
ASIN: 0691034109 |
Book Description
How should firms decide whether and when to invest in new capital equipment, additions to their workforce, or the development of new products? Why have traditional economic models of investment failed to explain the behavior of investment spending in the United States and other countries? In this book, Avinash Dixit and Robert Pindyck provide the first detailed exposition of a new theoretical approach to the capital investment decisions of firms, stressing the irreversibility of most investment decisions, and the ongoing uncertainty of the economic environment in which these decisions are made. In so doing, they answer important questions about investment decisions and the behavior of investment spending.
This new approach to investment recognizes the option value of waiting for better (but never complete) information. It exploits an analogy with the theory of options in financial markets, which permits a much richer dynamic framework than was possible with the traditional theory of investment. The authors present the new theory in a clear and systematic way, and consolidate, synthesize, and extend the various strands of research that have come out of the theory. Their book shows the importance of the theory for understanding investment behavior of firms; develops the implications of this theory for industry dynamics and for government policy concerning investment; and shows how the theory can be applied to specific industries and to a wide variety of business problems.
Customer Reviews:
Not a new theory,but a new way of solving Keynes's theory.......2004-07-23
Dixit and Pindyck(DP)have not come up with a new theory of investment. The three aspects that they deal with in their theory are the irreversibility of costly fixed plant and equipment,the uncertainty of the information base upon which the probabilities will be estimated,and the timing of the investment project over a series of future time periods.DP correctly point out that the NPV rule does not deal with the uncertainty of the information base upon which the probabilities will be calculated while also ignoring the question of the timing of a project,given that additional new relevant information on the potential expected profitability of a project may be forthcoming in future time periods.Thus, there is a value that can be assigned to waiting for this additional relevant evidence to occur in the future.The Net Present Value( NPV) rule or the Capital Asset Pricing Model (CAPM)only deals with risk,not uncertainty.Both of these rules assume the existence of a unique,well defined probability distribution that satisfies the law of large numbers.A decision maker need only concern himself with the variability of the outcomes over time. This is measured by the standard deviation.DP demonstrate that the standard approach to investment theory discounts only for time and risk while ignoring uncertainty or conflating uncertainty with risk.DP advocate an additional discount for uncertainty.DP obtain this result using the calculus of variations, optimal control theory,stochastic control theory and dynamic programming.These techniques,while interesting ,are not necessary in order to obtain the given result.A much less advanced mathematical approach was used by John Maynard Keynes to obtain approximately the same result.A criticism of this book would be the failure on the part of DP to mention the similarities between their theory and that of Keynes.Keynes's theory is covered in chapters 11,12 and 17 of Keynes's 1936 book ,titled the General Theory(GT).In chapter 17 ,Keynes makes a very important addition to the theory of the previously mentioned chapters on pages 239-241 where Keynes points out that the decision maker must also discount for uncertainty as well as for risk and time preference.Keynes's footnote on page 240 of the GT directs the reader to his technical model contained in chapter 26 of A Treatise on Probability, called a conventional coefficient of weight and risk c.In order to obtain approximately the same result as obtained by DP,one needed only multiply Keynes's NPV model of chapter 11 of the GT by the c coefficient.
real options.......2004-05-03
ok, i found this book is very important and give a new vision to understant the world of investement under uncertainty , further it demonstrate a new application nommed real options, by this new model we can making same decision with integrating the notion of flexibility in procesus of investement
Not For The Faint-Hearted.......2000-01-28
Investment Under Undertainty by Avinash Dixit and Robert Pindyck has been an important book in the 1990's because it introduced a relatively new subject to a new and eager audience when there was little else available outside of original research papers. Many of us are grateful to the authors for this introduction. However, newcomers should be aware that they omit large and crucial details of implementation [example: chapter 4, section 1H, pages 110-112 including the graphs on page 111: a newcomer will be lost; if you wait until the appendix to chapter 10, on numerical solution, then you may or may not note the printing errors]. The book is not for the faint-hearted beginner; even the simplest material, such as valuation of a perpetuity (see Corporate Finance by Brealey & Myers - very easy) occurs in a form which the beginner or skim-reading manager might not readily recognise (chapter 5, section 1A, pages 138-139); but then this book is not for them.
See also Real Options by Lenos Trigeorgis, who writes as if he keenly wants you to have fast access to his subject. For someone writing purely on the mathematical finance aspects, read anything by Paul Wilmott, who is clearly both clever and an exceptional educator
dealing with uncertainty.......2000-01-06
When searching for a framework for my PhD, I encountered Dixit's 1991 exposition on investmetn under uncertainty, in Journal of Economic Perspective. I was immeadiately hooked on option theory and its applications. Both authors of this splendid book are authorities in this field. The book is ideal for advanced MBA students with some mathamatics background. It is also suitable for PhD students in economics and finance. However students with math or engineering backgrounds may also benefit from reading this book.
As this book has repeatedly demonstrate, investmet in a uncertain world involves exercising an option. I mat asure the readers and buyers alike, investing in this book will yield high returns for your time and money.
State of the art -- but math is a required subject.......1999-08-24
Let me say that this is not a book for those looking for investment advice or get-rich-quick schemes. It is also not a book for those who think that an MBA and an HP12C are all you need to understand the basic theory behind investments, options, etc.
It is a mathematical subject...and to those with a good mathematical background, the book is remarkably well-organized and easy to understand. I found this book to be very helpful in my research.
Book Description
This book is devoted to investment decision-making under uncertainty. The book covers three basic approaches to this process: The stochastic dominance approach; the mean-variance approach; and the non-expected utility approach, focusing on prospect theory and its modified version, cumulative prospect theory.
These approaches are discussed and compared in this book. In addition, this volume examines cases in which stochastic dominance rules coincide with the mean-variance rule and cases in which contradictions between these two approaches may occur. It then discusses the relationship between stochastic dominance rules and prospect theory, and establishes a new investment decision rule which combines the two and which we call prospect stochastic dominance. Although all three approaches are discussed, most of the book is devoted to the stochastic dominance paradigm.
Book Description
The study of investment under uncertainty was stagnant for several decades, until recent developments in real options provided the tools to revitalize the field. The techniques and insights derived from option pricing can now be used to quantify the elusive elements of managerial operating flexibility and strategic interactions ignored or underestimated by conventional Net Present Value and other quantitative approaches.
Topics covered include the reasons for the under-investment problem and conceptual frameworks for viewing productive investment opportunities as real options; useful valuation building blocks; the quantifying of various types of real options separately and in combination; strategic aspects of investment under uncertainty; numerical analysis techniques; a variety of applications, including the valuing of natural resources, R&D and pioneer ventures, land development, strategic acquisitions, government subsidies, power plants and pollution options, flexible manufacturing, and multinational operations; and empirical evidence from oil leasing, land prices, and discontinued operations.
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Capital Budgeting Under Conditions of Uncertainty (Nijenrode Studies in Business)
R.L. Crum , and
F.G.J. Derkinderen
Manufacturer: Springer
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ASIN: 0898380456 |
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Capital Budgeting Under Uncertainty
Manufacturer: Prentice Hall College Div
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ASIN: 0131172506 |
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Engineering investment decisions: Planning under uncertainty
L. M Rose
Manufacturer: Elsevier Scientific Pub. Co. : distributors for the U.S. and Canada, Elsevier / North Holland
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Investment under Uncertainty, Coalition Spillovers and Market Evolution in a Game Theoretic Perspective (Theory and Decision Library C:)
J.H.H Thijssen
Manufacturer: Springer
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ASIN: 1402078773 |
Book Description
Two crucial aspects of economic reality are uncertainty and dynamics. In this book, new models and techniques are developed to analyse economic dynamics in an uncertain environment. In the first part, investment decisions of firms are analysed in a framework where imperfect information regarding the investment's profitability is obtained randomly over time. In the second part, a new class of cooperative games, spillover games, is developed and applied to a particular investment problem under uncertainty: mergers. In the third part, the effect of bounded rationality on market evolution is analysed for oligopolistic competition and incomplete financial markets.
Book Description
This comprehensive study of political risk analysis and management presents empirical data on the political risk management practices of banks and multinational corporations, both before and since the 1970s. After analyzing the gap between risk analysis needs and capabilities, the author presents a decision system for integrating risk assessments into international lending decisions, and outlines a decision-making matrix, derived from portfolio theory, for use in multinational corporation strategic planning. In conclusion, he suggests trends for the international business environment of the future, analyzing the implications for corporations and lending institutions alike.
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Power Pitches: How to Produce Winning Presentations Using Charts, Slides, Video & Multimedia
Alan L. Brown
Manufacturer: Irwin Professional Pub
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ASIN: 0786309725 |
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When the competition heats up, sophisticated visual support tools can make a critical difference in the success of any business presentation. Effective visual communications-including boards, overhead transparencies, slides, videos, and multimedia can help create more sales, close more important deals and better motivate employees! In his invaluable book, visual marketing expert Alan Brown reveals the tools and techniques needed to create compelling and dynamic presentations that will captivate audiences and win more sales. Whether preparing for their first or 500th presentation, readers are guaranteed to find tips and techniques to help ensure success. Brown, who has devoted 30 years to helping develop presentations that win customers and grow their businesses, shares the secrets of producing powerful sales presentations, including: how to communicate more powerfully with visuals; using storyboards to strengthen content and continuity; introducing the visual language; the 10 rules of power pitching; how to use videos to persuade any audience.
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Cool Careers Without College for People Who Love to Travel (Cool Careers Without College)
Simone Payment
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Careers in the Food Services Industry (Success Without College)
Robert K. Otterbourg
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Information on job recruitment, hiring practices, pay scales, and jobs available starts with advice on how to apprentice in food service careers. Other topics covered include the pros and cons of cooking schools, more than 25 profiles of people who have broken into the food service industry, learning to become a professional baker, knowing how to operate a successful catering business, and much more.
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Careers w/o College: TRAVEL (Careers Without College)
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Including helpful strategies for finding mentors and networking, boosting personal emotional intelligence, and evaluating future job prospects, managers will find actionable advice for getting and staying on a rewarding career track.
Fast and actionable tools and strategies for improving critical management skills—culled from Harvard Business School Publishing’s respected newsletters Harvard Management Update and Harvard Management Communication Letter
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- Optimal Control, Expectations and Uncertainty
- Pocket World in Figures - 2007 Edition
- Policy Reforms and Agriculture Development in Central Asia (Natural Resource Management and Policy)
- Poverty Comparisons (Fundamentals of Pure and Applied Economics)
- Principles of Managerial Finance Brief (4th Edition)
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