Hodder, James E.; Mello, Antonio S.; Sick, Gordon - In: Journal of Applied Corporate Finance 14 (2001) 2, pp. 90-101
This paper examines three alternative approaches to valuing real options: (1) the standard option pricing technique using "risk-neutral" probabilities; (2) the use of risk-adjusted discount rates; and (3) discounting certainty-equivalent values with a riskless discount rate. As suggested by the...