Although uncertainty and flexibility are important attributes that drive the value of an investment, they are seldom systematically considered in traditional financial analysis. Through theory and case studies, Decision Options: The Art and Science of Making Decisions details how uncertainty and flexibility can be evaluated to assist in making better investment decisions in companies. Harnessing the author’s own software technology, the book supplies a tool set that enables the incorporation of uncertainty and flexibility in investment decisions up front without being too complex.
After a qualitative introduction to decision options, the author covers private and market risks, including how risks relate to decisions and the use of stochastic processes to represent risks. He then presents self-standing options, such as financial options and options pricing theory; describes how decision options are different from single-standing financial options; and deals with a special case of decision options in pricing employee stock options. The next several chapters focus on various case studies of practical applications of decision options. The book also explores common misperceptions around the term real options and the impediments that currently exist in large companies for the systematic practice of decision options.
Providing rigorous methods to use when making decisions, this book helps readers reduce the time and effort needed to reach decisions and build consensus, improve decision fidelity and communication, and enhance the value of their enterprise.
Table of Contents
Decisions, Options, and Decision Options
Decisions as Predetermined Outcomes, Options, and Risks
Private Risks and Probabilities
Market Risks and Stochastic Processes
Self-Standing Options and Pricing of Options
Pricing of Decision Options
Employee Stock Options as Decision Options
Case Studies in Life Sciences
Case Studies in Technology and Manufacturing
Case Studies in Commodities
Case Studies in Financial Services
Misperceptions Regarding Real Options
Challenges to Decision Options Implementation and Possible Remedies
Past, Present, and Future
Gill Eapen is the founder and managing principal of Decision Options, LLC, a boutique advisory services company. He developed Decision Options Technology, a software platform that allows modeling of complex decision problems and assets to improve decision making, risk management, and portfolio maximization. He also designed Decision Options Equity Research, an automated analysis and trading system for publicly traded securities. Eapen holds graduate degrees from the University of Chicago and Northwestern University and an undergraduate degree from the Indian Institute of Technology.