This thesis proposes the use of the hybrid real options framework presented by Neely (1998)to facilitate valuation of, and decision making in, R&D projects. The framework combines thefavorable benefits from Decision Analysis (DA) and financial option theory, which are the twomost commonly applied methodologies for real option assessments. The combined frameworkaddresses the DA’s incapability for handling a fluctuating discount rate in a practical way, andthe financial option theory’s requirement of historical data, that is generally unavailable forunique R&D projects. The value of flexibility is estimated by distinguishing two types of risks;project and market risks, where DA and option theory are applied, respectively.The hybrid real options is a practical and at the same time accurate approach. It allows the useof the risk-free rate as a consistent constant discount rate. In addition, the valuation becomesorganized in the sense that the process is divided in a technical and financial part. Hence, technicaland financial experts can apply their knowledge independently. However, the framework’suse of a decision tree restricts the complexity of the model as it could turn too comprehensiveto be applicable in an assessments context.When exemplifying the framework, an option to continue or abandon further development of CCSis modelled. The framework values the CCS project - at best - when continuing the development.This returns an expected profit of NOK 28 billion. However, risk analysis yields a probabilityclose to 50% that the project returns a loss of similar magnitude. The estimated expected valueis NOK 860 million higher compared to the traditional Net Present Value methodology. Hence,the value of including the inherent flexibility of an R&D project is significant. In this context,this difference represents the option value in the decision of whether to implement or not.The sensitivity analysis concludes that the annual growth in production stand out as the mostimportant variable for the expected value of Carbon Capture and Storage (CCS). This is ratherintuitive as new production yields possibly large emissions of CO2, which is the main benefitdriver for the CCS technology. In addition, the share of unconventional oil in new production,that we assume would require CCS, is essential.We extend the framework of Neely (1998) by incorporating simple game theory, which provedto introduce a significant value change because of the possible strategic advantages of a CCSinvolvement. The game considered only a valuation of the First Mover Advantage (FMA) and showed that the strategic value is superior to the flexibility value by more than NOK 50 billion. The dominant strategy is to continue further development of CCS, which then values the project at NOK 48.1 billion. Now, risk analysis concludes that there is a probability of more than 70% to achieve a positive return from the CCS R&D project.For further work, a more detailed consideration of game theory is suggested. An interestingtopic would be Statoil’s impact on its own technology supply environment - does it really makea difference that Statoil is engaged in the CCS field, or should it let others do the hard work? Inaddition, inclusion of other uses of the CCS technology would yield a more complete valuation.

Structural estimation is an important technique in analyzing economic data. Unfortunately, it is often computationally expensive to implement the most powerful and efficient statistical methods. One such method is the Nested Fixed Point (NFXP) algorithm. In this thesis, we develop methodology and techniques that allow us to apply NFXP to real options models of hy- dropower production. In particular, we develop a way to regard hydropower planning and scheduling as a stationary problem. Further, we create a nu- merical method for solving specific types of equation systems with sparse matrices of a specific structure, an approach that significantly increases the speed with which we can compute Fréchet and partial derivatives of con- traction mappings for large state spaces.

I formulate a phase theory of microcredit market dynamics. The theory is developed and validated using an in-depth multiple case study examining three mature microfinance markets: Bolivia, Bosnia and Herzegovina, and Morocco. I present a specific case study framework that is used to analyze each of the three markets separately. This framework combines qualitative and quantitative empirical analysis through the evaluation of 12 specific indicators. These indicators are chosen to represent four different market dynamics that are believed to affect microfinance institutions and their performance.A cross-case analysis is conducted to detect similar patterns across the three mature markets, and the findings are summarized into the phase theory. I present a theory of six different phases that a microfinance market goes through from its emergence until the crisis is resolved. Some of the important findings across the three cases are rapid growth, increased bargaining power of consumers and excessive funding to the microfinance institutions, all in the time period leading up to the repayment crisis.In essence, the phase theory predicts that a market that grows beyond what is sustainable and controllable will eventually crash when macroeconomic instability occurs. To make sure a market maintains a sustainable growth, it’s important for the microfinance institutions to focus on long-term profitability over short-term growth. Mechanisms for information sharing are also essential to eliminate the new information asymmetries that arise from introducing competition in microcredit markets.I also examine a microfinance market that is under development: Cambodia. This market has not yet experienced a repayment crisis, and I apply the phase theory on this case market to assess how likely it is that it will.

The purpose of this work has been to develop a generic framework with a set of indicators, suited for ensuring that technology will be successfully transferred. It was stressed that the framework should be generic, as it should be suitable for projects with differing technologies, locations and environments. Methodology:The development of the indicators followed a systematic and rigorous process, starting with formulation of visions, sub-visions and goals for successful technology transfer. The formulation was completed in the specialisation project during the autumn 2010. The indicators were then prepared in response to the formulated goals, and categorized within either the social, institutional, environmental, business or technological dimension. The indicators are for practical purposes gathered in a Protocol, which provides a complete tool for considering technology transfer on the project level. To further operationalize the Protocol, a technology-specific set of indicators was called for. As a response, one indicator set for hydropower, and one indicator set for wind power is prepared. The indicator development was an iterative process, where the indicators were reviewed by experts and tested on ongoing projects. Firstly, a Delphi Survey was conducted, with academics and practitioners within the fields of international energy production and technology transfer. The survey had 12 respondents from 11 different organisations. Secondly, the validity of the indicator set was attempted indicated by comparing the result of using the Protocol, with the observed technology transfer track record for two operating projects. Results:The Delphi Survey showed that the experts agreed that the indicators for assessing technology transfer potential in general were of high quality, and their suggestions for further improvements were later implemented. The case studies showed that the results of using the Protocol indeed correlated with the observed technology transfer in both projects. However, this is only regarded as an indication of the validity of the Protocol, not as a rigorous proof. Conclusion and further work: The work with this thesis has culminated in a Protocol for assessing the potential for technology transfer in energy projects. The indicators are thoroughly reviewed and applied. To further validate the Protocol as a tool predicting technology transfer, an extensive study should be conducted with a large number of projects, where the results from applying the Protocol in the early stages are compared with the observed technology transfer. Additionally, more technology-specific indicator sets could be prepared for other forms of energy production technologies.

This empirical study examines investment behavior in small hydropower investments under uncertain electricity prices and revenues from selling so-called green certificates. We assess 73 small hydropower projects granted a license to build from the Norwegian authorities. The license is considered an American call option with infinite lifetime. To examine the investment behavior, we conduct a survey to recreate the available information on the date of investment decision. We apply a net present value approach and a real options value approach to the small hydropower projects by using two scenarios; with and without green certificates. Our data does not support that a real options approach explains investor behavior better than a net present value approach.

Havbruksnæringen er en stor næring i Norge, og har opplevd store endringer i struktur og lovverk de siste årene. Sjøvanndelen av verdikjeden for oppdrettslaks har siden 2005 blitt regulert av et krav om maksimal tillatt biomasse på anleggs- og regionsbasis. I tillegg innføres det nå i store deler av landet geografiske soner hvor alle anlegg innenfor en sone har felles brakkleggingsperiode. Vi har laget en stokastisk optimeringsmodell som kan hjelpe aktører med taktisk planlegging av smoltutsett og utslakting. Modellen er rettet mot store aktører med en stor portefølje av anlegg, og har blitt testet for Marine Harvests anlegg i Midt-Norge. Vekst og dødelighet er usikre faktorer i modellen. Resultatene viser at usikker dødelighet er lettere å kompensere for i fremtidige utsett enn usikker vekst. Vi finner at det er gunstig å tillate, og planlegge for, utslakt på lavere vekter enn målvekten. Særlig gjelder dette for utslakt i månedene mai-juni. Et annet alternativ er å endre fra dagens målsatte slaktevekt på 6 kg til en målvekt på 5,5 kg. Ved å endre målvekten får vi med vår modell en økning i totalvolum av slaktet laks på over 10 %.

In this thesis I evaluate technical efficiency and productivity for use in performance evaluation in incentive systems. In light of agency theory and the organizational context, these techniques have several promising attributes for use in incentive schemes, despite their limited occurrence in the incentive literature. The use of data envelopment analysis (DEA) for estimating technical efficiency limit subjective evaluations and eliminate unwanted Nash-equilibrium under comparative evaluation. The Hicks-Moorsteen index prove to be the preferable index for measuring productivity change, as it cope with technologies exhibiting globally variable returns to scale. By coupling DEA and Hicks-Moorsteen we get four linear programs, which are easy to solve with developed software. However, infeasibility might occur when estimating the index and no remedies to this problem exist in the literature. Infeasibility will not occur for continuous time indices or when estimating technical efficiency with Stochastic Frontier Analysis (SFA). Although, SFA is poor on other aspects and software incorporating continuous time indexes are yet to be developed.The use of productivity as a method for performance evaluation might offset systematic bias for comparative evaluation in heterogeneous environments, and will in most cases give employees strong incentives to improve. Technical efficiency might induce efficient employees to only maintain their level of effort, but super efficiency models reduce this threat. When computing technical efficiency, environmental factors should be adjusted for through a stepwise regression procedure in order to reduce uncontrollable risk. Although the goal is to implement a model that minimize subjective evaluations that might lead to favoritism, a final expert judgment should verify or disprove the performance scores.

Value at risk (VaR) and Expected Shortfall (ES) are commonly used risk measures in the financial literature. They have however not been applied to a great extent on energy derivatives. This paper compares the performance of several VaR and ES models for energy commodity futures on some of the world’s largest commodity exchanges. In total 14 different VaR models and nine ES models are evaluated; GARCH and GJR-GARCH with normal, student t, GED and skewed student t distributions and EWQR are used to obtain both VaR and ES forecasts. In addition, five CAViaR models are used in the VaR analysis.EWQR is by far the best ES model. It has very good test results for all markets and quantiles considered. The VaR results vary greatly, and there does not appear to be any clear pattern in which some models are better suited for certain markets or commodities. The VaR models with best performance overall are however EWQR, the adaptive CAViaR and GARCH and GJR-GARCH models with student t and skewed student t distributions.

I find non-investment graded companies’ motives for issuing convertible bonds in the Norwegian market by evaluating logistic regression results from a two-step security choice model from samples of 28 convertible bond-, 102 bond- and 229 equity issuances from 2005 to 2011. The findings indicate that companies in the Norwegian market substitute convertibles for bonds if they have valuable investment opportunities at hand and are associated with risk and uncertainty. This paper argues that the issuers of convertible bonds substitute convertibles for bonds to mitigate the asset substitution problem and mitigate debt-related financing costs under the asymmetric information theory. I further deduce that convertibles are used as a debt-instrument in the Norwegian market, different from the US market and more similar to the Western European market. Finding the issuers’ motives for issuing convertibles in Norway extend current academic research, and can be a fundament for investors’ when evaluating different convertible bond investment opportunities.

In order to determine the structure of the optimal CEO contract, we create a principal agent model and implement it on a sample of Norwegian firms. The model takes account of executives’ loss‐ and risk‐aversion and the fact that undiversified and risk‐averse executives do not put the same value on stock options as shareholders do. We employ the certainty equivalent approach in determining the perceived value of the CEO’s stock options and conduct a comprehensive numerical computer simulation to determine the optimal CEO contract.Our analysis delivers four important findings. First, our results show that the option’s exercise price of long term option grants does not affect executive performance in the optimal contract. When awarding the executive premium or at‐the‐money options, we find similar CEO performance and contracts cost for long term options grants. Premium options do however have a lower incentive effect. At‐the‐money options must therefore be substituted with larger amounts of premium options to induce the same level of effort.Second, the CEO’s ability to affect the firm outcome has a large impact on the optimal contract. As the executive’s action has an increasing impact on the firm performance, the marginal incentive effect from equity awards increase. This results in higher levels of effort and cheaper contracts.Third, our results indicate that Norwegian firms suffer large agency costs as they fail to present executives with optimal contracts. Norwegian executives should receive more stocks and options and a lower base salary. This tradeoff would involve a transfer of risk from the shareholders to the executive, resulting in a higher total compensation due to the CEO’s need for a risk premium. The increase in executive compensation is however more than outweighed by the increase in CEO effort and shareholder return. We also find it to be optimal from the shareholders view that executives invest more of their personal wealth in the company.Finally, we show that our model is a good predictor of CEO performance. When we run our model for the actual CEO contract of the sample firms, we predict a performance close to the observed level. This suggests that executives indeed are risk‐ and loss‐averse. We propose some societal constraints on the magnitude of the executive compensation in Norway in an attempt to explain why firms fail to present executives with optimal performance incentives.