Anaerobic digester (AD) technology is a form of renewable energy that’s economic feasibility assessment is required site by site. This thesis presents a freely available workbook to determine the financial feasibility of a farm-based AD and to demonstrate its use for the Ontario livestock sector. To assess the profitability of ADs for farmers in Ontario with uncertainty included the theory of real options is used. Investment in an AD is financially feasible only for the largest dairy farms in Ontario under current electricity prices, which are approximately six times greater than the wholesale price. Shifting to a duel fuel continuous system would improve returns, as would the availability of additional substrate material in the form of solid grease waste. The real options approach shows that even higher net returns are necessary, than indicated by more traditional approaches, in order for AD investments to be feasible for Ontario livestock farmers.

A risky project evaluation technique called the fuzzy real options analysis is developed to evaluate brownfield redevelopment projects. Other decision making techniques, such as multiple criteria analysis and conflict analysis, can be incorporated into fuzzy real options analysis to facilitate negotiations on brownfield redevelopment among decision makers (DMs). The value of managerial flexibility, which is important in negotiations and policy making for brownfield redevelopment, is overlooked when the traditional evaluation method, net present value (NPV), is employed. Findings of this thesis can be used to promote brownfield redevelopment, thereby helping to eliminate environmental threats and enhance regional sustainability. A brownfield is an abandoned or underutilized property that contains, or may contain, pollutants, hazardous substances, or contaminants from previous usage, typically industrial activity. Brownfields often occur when the local economy transits from industrial to service-oriented seeking more profit. Governments actively promote brownfield redevelopment to eliminate public health threats, help economic transition, and enhance sustainability. However, developers are reluctant to participate in brownfield redevelopment because they often regard these projects as unprofitable when using classic evaluation techniques. On the other hand, case studies show that brownfield redevelopment projects can be good business opportunities for developers. An improved evaluation method is developed in order to estimate the value of a brownfield more accurately. The main reason that makes the difference between estimates and ''actual'' values lies in the failure of the deterministic project evaluation tool to price the value of uncertainty, which leads to efforts to enhance the decision making under uncertainty. Real options modelling, which extends the ability of option pricing models in real asset evaluation, is employed in risky project evaluation because of its capacity to handle uncertainties. However, brownfield redevelopment projects contain uncertain factors that have no market price, thus violating the assumption of option pricing models for which all risks have been reflected in the market. This problem, called private risk, is addressed by incorporating fuzzy numbers into real options in this thesis, which can be called fuzzy real options. Fuzzy real options are shown to generalize the original model to deal with additional kinds of uncertainties, making them more suitable for project evaluation. A numerical technique based on hybrid variables is developed to price fuzzy real options. We proposed an extension of Least Squares Monte-Carlo simulation (LSM) that produces numerical evaluations of options. A major advantage of this methodology lies in its ability to produce results regardless of whether or not an analytic solution exists. Tests show that the generalized LSM produces similar results to the analytic valuation of fuzzy real options, when this is possible. To facilitate parameter estimation for the fuzzy real options model, another numerical method is proposed to represent the likelihood of contamination of a brownfield using fuzzy boundaries. Linguistic quantifiers and ordered weighted averaging (OWA) techniques are utilized to determine the likelihood of pollution at sample locations based on multiple environmental indicators, acting as a fuzzy deduction rule to calculate the triangle membership functions of the fuzzy parameters. Risk preferences of DMs are expressed as different ''ORness'' levels of OWA operators, which affect likelihood estimates. When the fuzzy boundaries of a brownfield are generated by interpolation of sample points, the parameters of fuzzy real options, drift rate and volatility, can be calculated as fuzzy numbers. Hence, this proposed method can act as an intermediary between DMs and the fuzzy real options models, making this model much easier to apply. The values of DMs to a brownfield can be input to the graph model for conflict resolution (GMCR) to identify possible resolutions during brownfield redevelopment negotiation among all possible states, or combinations of DMs' choices. Major redevelopment policies are studied using a brownfield redevelopment case, Ralgreen Community in Kitchener, Ontario, Canada. The fuzzy preference framework and probability-based comparison method to rank fuzzy variables are employed to integrate fuzzy real options and GMCR. Insights into this conflict and general policy suggestions are provided. A potential negotiation support system (NSS) implementing these numerical methods is discussed in the context of negotiating brownfield redevelopment projects. The NSS combines the computational modules, decision support system (DSS) prototypes, and geographic information systems (GIS), and message systems. A public-private partnership (PPP) will be enhanced through information sharing, scenario generation, and conflict analysis provided by the NSS, encouraging more efficient brownfield redevelopment and leading to greater regional sustainability. The integrated usage of fuzzy real options, OWA, and GMCR takes advantage of fuzziness and randomness, making better evaluation technique available in a multiple DMs negotiation setting. Decision techniques expand their range from decision analysis, multiple criteria analysis, to a game-theoretic approach, contributing to a big picture on decision making under uncertainty. When these methods are used to study brownfield redevelopment, we found that creating better business opportunities, such as allowing land use change to raise net income, are more important in determining equilibria than remediation cost refunding. Better redevelopment policies can be proposed to aid negotiations among stakeholders.

For more than 20 years, cap-and-trade system has served as an efficient market-based mechanism to reduce emission of air pollutants such as sulfur dioxide and greenhouse gas. In this system, a limited amount of emission allowances are traded between affected firms with no price restriction. A potential problem arises when market demand of the allowances significantly surpasses market supply: allowance prices could boom to unexpected high level that jeopardizes the overall economy. Safety valve, an innovative mechanism, sets an upper limit of the allowance price and eliminates the risk of allowance price spike. Yet individual firms would bear less incentive to undertake substantial investment in costly emission reduction equipment. This paper analyzes how firms would change their investment strategy when we add a safety valve to a cap-and trade system. Since the allowance price evolution process is time dependent and does not follow the standard Geometric Brownian Motion, there is no analytical solution to this problem, hence we base our analysis on numerical analysis. Using a lattice model, we conclude that a safety valve would undoubtedly delay firms’ actual investment in emission reduction equipment. We also conduct sensitivity tests to analyze how would a firm’s investment strategy respond to change in some model parameters.

Thesis (Ph. D.)--Auburn University, 2008. / Abstract. Vita. Includes bibliographical references (p. 159-170).

Thesis (Ph. D.)--University of California, Santa Cruz, 2003. / Typescript. Includes bibliographical references (leaves 161-169).

Thesis (Ph.D.) - University of St Andrews, February 2010.

Thesis (Ph. D.)--University of Hong Kong, 2006. / Title proper from title frame. Also available in printed format.

Os métodos tradicionais de análise de investimentos, como o valor presente líquido (VPL) e a taxa interna de retorno (TIR), baseiam-se em previsões de fluxos de caixa futuros. Os fluxos de caixa futuros são estimados e os valores destes podem divergir daquilo que foi esperado, uma vez que o futuro é incerto. As variáveis que influenciam o projeto, as quais fazem parte de uma previsão inicial, podem mudar significativamente. Em um ambiente de grande incerteza com relação ao futuro, é necessário considerar o quanto o projeto irá permitir que a gerência possa reagir frente às mudanças no cenário empresarial. Contudo, a metodologia tradicional ignora as possíveis ações gerenciais que podem ser tomadas em resposta às mudanças no contexto empresarial, sejam estas favoráveis ou não ao projeto, o que pode induzir a decisões de investimento equivocadas. O objetivo geral deste trabalho consiste em avaliar a aplicabilidade da teoria de opções reais como instrumento de avaliação de projetos de investimento. Buscou-se, ainda, verificar quais as vantagens e desvantagens da teoria de opções reais com relação aos métodos tradicionais de avaliação de investimentos; verificar para quais situações a teoria de opções reais mostra-se mais adequada e apresentar as limitações e as principais dificuldades enfrentadas ao utilizar a teoria de opções reais como metodologia de avaliação de projetos de investimento. Para tanto, no presente trabalho, após ampla revisão bibliográfica sobre o tema, foi realizado um exercício teórico, em que foi desenvolvido um projeto de investimento. Objetivou-se, por meio do desenvolvimento desse projeto de investimento, verificar as diferenças entre duas metodologias de avaliação de projetos de investimento: o valor presente líquido, que consiste em uma metodologia tradicional, e uma metodologia alternativa, que, neste trabalho, é a teoria de opções reais. / The traditional methods of investments analysis, as the net present value (NPV) and the internal rate of return (IRR), are based on forecast of future cash flows. The future cash flows are esteemed and their values can differentiate from the expected, as the future is uncertain. The variables that influence the project, which are part of an initial forecast, can change significantly. In an environment of great uncertainty related to the future, it is necessary to consider how much the project will allow that the management can react against the changes in the enterprise scene. However, the traditional methodology ignores the possible managerial actions which can be taken in reply to the changes in the enterprise context, being them either favorable to the project or not, what can induce to wrong investment decisions. The general objective of this work consists of evaluation the applicability of the real options theory as instrument of investment projects evaluation. It was still sought the advantages and disadvantages of real options theory related to the traditional methods of investments evaluations; to verify which situations the real options theory reveals mores adequate and present the limitations and the main difficulties coped with, when used the real options theory as methodology of investment projects evaluation. However, in the present work, after wide bibliographical revision on the subject, a theoretical exercise was made, where an investmentproject was developed. It was aimed by means of development of this investment project, to verify the differences between two methodologies of investment projects evaluation: the net present value, that is a traditional methodology, and an alternative methodology, that in this work, is the real options theory.

Esta tese tem como objetivo estudar os efeitos dos benefícios governamentais nos investimentos em petróleo e gás no Brasil, sob a abordagem da teoria das opções reais, a qual encara o investimento como uma call cujo ativo subjacente é o valor do projeto e cujo preço de exercício são os gastos no investimento. A vantagem desta abordagem é a avaliação do impacto de diversas flexibilidades operacionais, que assumem a forma de opções, sobre a decisão de investir. Tais flexibilidades são ignoradas em uma análise tradicional de valor presente líquido, podendo conduzir a uma sub-avaliação da jazida de petróleo e a decisões errôneas de investimento. Após uma análise quantitativa da série de preço internacional do petróleo, conclui-se que o Movimento Browniano Geométrico representa uma aproximação aceitável para representar a evolução do valor do barril, uma das variáveis de estado da qual o valor das reservas depende. Assume-se, também, que o valor da reserva depende do custo marginal de extração, o qual é crescente à medida que a jazida se esgota - uma propriedade peculiar aos recursos não-renováveis conhecida como Efeito Jevons. Sob tais hipóteses, procura-se analisar como os royalties e as participações especiais no Brasil afetam a razão preço-custo que torna o agente indiferente entre investir ou não no desenvolvimento de um campo de petróleo ou gás, no contexto do término da fase de exploração e início da fase de desenvolvimento. / This thesis has the aim of studying the effects of petroleum and gas governments benefits on investments, under the approach of Real Option theory, which considers the investment as a call whose underlying asset is the value of the project and whose strike price is the expense in investment. The advantage of this approach is the evaluation of several operational flexibilities - as options on the decision to invest. These flexibilities are ignored in a traditional Net Present Value approach, which may lead to an undervaluation of the oil deposit and to an erroneous decision to invest. After a quantitative analysis on the international oil price series, we conclude that Geometric Brownian Motion is an acceptable proxy to perform the evolution of the barrels value, which is one of the state variables the value of reserve depends on. We also assume that the value of reserve depends on the marginal cost of extraction, which is increasing as the reservoir depletes - a peculiar property of nonrenewable resources known as Jevons Effect. Under such assumptions, we search to evaluate how royalties and special participation in Brazil affect the ratio price-cost which makes the agent be indifferent between invest or not invest in the development of a oil or gas field, in the context of the end of exploration phase and the beginning of the development.

This thesis is concerned with the evaluation of real options whose value represents a certain flexibility of the firm to decide about company´s assets in the future. In addition to classic models which were developed for option rating, such as binomial and Black-Scholes model, which have advantages and disadvantages, there is introduced a possible combination of decision trees and simulation Monte Carlo which runs directly inside the tree. This combination can erase the disadvantages which these methods have when they are used separately for option evaluation. In this thesis there can be found an application example inspired by a real situation and there are described different possibilities of usage of the mentioned combination and there is also demonstrated an unambiguous advantage of this method and that is a bigger amount of information which is provided in comparison with standard models. It allows the company to access much more complex image of the investment. The result is also various option values according to the used technique.