Episode Details

We started this class by looking at the basic option pricing models. After that, we moved on with an examination of option pricing models, and used real options to examine why the rights to non-viable technology can be valuable and why the values of natural resource companies are affected by both the level and variability of commodity prices . As a cautionary note, you are pushing option pricing models to breaking point when using them to value these options, but the key takeaway is that even if you do not value the options explicitly, understanding that they exist can alter how you behave as a business. It is also true that the information that you will need to value many real options will be accessible only if you work at the pharmaceutical or natural resource company, and consequently, you cannot apply it to your company (project), since you will not have that access.
Start of the class test: https://pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/pvttopublicclosure.pdf
Slides: https://www.stern.nyu.edu/~adamodar/podcasts/valspr23/session22slides.pdf
Post class test: https://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session22Atest.pdf
Post class test solution: https://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session22Asoln.pdf

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