Timing Of Auctions Of Real Options
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Timing Of Auctions Of Real Options
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Author : Lin William Cong
language : en
Publisher:
Release Date : 2019
Timing Of Auctions Of Real Options written by Lin William Cong and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.
This paper endogenizes auction timing and initiation in auctions of real options. Because bidders have information rent, a seller faces a "virtual strike price" higher than the actual exercise cost. She inefficiently delays the auction to encourage bidder participation and utilizes the irreversible nature of time to gain partial control over option exercises. The seller's private benefit at option exercise may restore efficient auction timing, but option exercises are always inefficiently late. When she lacks commitment to auction timing, bidders always initiate in equilibrium, resulting in earlier option exercise and higher welfare than auctions proscribing bidder initiation. Overall, auction timing modifies the distribution of the bidder valuations and has important impact on bidding strategies, auction design, and real outcomes.
Auctions Of Real Options
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Author : Lin William Cong
language : en
Publisher:
Release Date : 2019
Auctions Of Real Options written by Lin William Cong and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.
Governments and corporations frequently auction assets with embedded real options using both cash and contingent bids. I characterize equilibrium bidding and option exercise strategies, and find that the moral hazard associated with uncontractible investment timing inefficiently and asymmetrically accelerates or delays investments. I use a mechanism design approach instead of the conventional"steepness'" concept to rank securities and derive the optimal security. Furthermore, without sellers' commitment to the security design, as seen in informal auctions such as corporate acquisitions, all auction equilibria are equivalent to cash auctions, and investments are socially efficient. The results are broadly consistent with empirical observations, for example in the sales of oil leases.
Real Options And Investment Under Uncertainty
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Author : Eduardo S. Schwartz
language : en
Publisher: MIT Press
Release Date : 2004
Real Options And Investment Under Uncertainty written by Eduardo S. Schwartz and has been published by MIT Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2004 with Business & Economics categories.
The study of investment under uncertainty was stagnant for several decades until developments in real options revitalized the field. The topics covered in this book include the reasons behind the under-investment programme.
Real Options In Practice
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Author : Marion A. Brach
language : en
Publisher: John Wiley & Sons
Release Date : 2003-04-07
Real Options In Practice written by Marion A. Brach and has been published by John Wiley & Sons this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003-04-07 with Business & Economics categories.
Explores real option theory applied in practice Real options are quickly becoming the valuation and decision-making method of choice for many companies, including oil and gas companies, utilities and natural resource companies, pharmaceutical and biotech companies, Internet companies, and many others. Real Options in Practice allows readers to view the world of real options from the vantage point of a corporate practitioner applying real option valuation techniques on a regular basis. Expert Marion Brach describes the challenges of implementing a real option framework in practice within a corporate setting. Touching on the real options most firms care about, Real Options in Practice identifies the classic types of real options-deferral, abandonment, switching, expansion, and compound-and explores the main concepts critical to understanding real option theory. Through Brach's own three-step real option valuation method readers will learn how the theory of real options is now being applied to drive better, more profitable corporate decision-making. Marion A. Brach, MD, MBA (Hagen, Germany), has undertaken financial valuation of business opportunities and acquisitions using scenario and real option valuation in the biotech industry. A recognized expert on real option theory and practice, Brach received her MBA from the Manchester Business School and frequently speaks at real option seminars.
Putting Auction Theory To Work
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Author : Paul Milgrom
language : en
Publisher: Cambridge University Press
Release Date : 2004-01-12
Putting Auction Theory To Work written by Paul Milgrom and has been published by Cambridge University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2004-01-12 with Business & Economics categories.
This book provides a comprehensive introduction to modern auction theory and its important new applications. It is written by a leading economic theorist whose suggestions guided the creation of the new spectrum auction designs. Aimed at graduate students and professionals in economics, the book gives the most up-to-date treatments of both traditional theories of 'optimal auctions' and newer theories of multi-unit auctions and package auctions, and shows by example how these theories are used. The analysis explores the limitations of prominent older designs, such as the Vickrey auction design, and evaluates the practical responses to those limitations. It explores the tension between the traditional theory of auctions with a fixed set of bidders, in which the seller seeks to squeeze as much revenue as possible from the fixed set, and the theory of auctions with endogenous entry, in which bidder profits must be respected to encourage participation.
Valuation And Dealmaking Of Technology Based Intellectual Property
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Author : Richard Razgaitis
language : en
Publisher: John Wiley & Sons
Release Date : 2009-08-03
Valuation And Dealmaking Of Technology Based Intellectual Property written by Richard Razgaitis and has been published by John Wiley & Sons this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009-08-03 with Law categories.
This indispensable tool provides readers with complete coverage of the issues, methods, and art of valuing and pricing of early-stage technologies including backgrounds in the core concepts, sources of value, methods of valuation, equity realizations, and negotiation strategies.
The Real Options Solution
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Author : F. Peter Boer
language : en
Publisher: John Wiley & Sons
Release Date : 2002-11-08
The Real Options Solution written by F. Peter Boer and has been published by John Wiley & Sons this book supported file pdf, txt, epub, kindle and other format this book has been release on 2002-11-08 with Business & Economics categories.
Harness the power of real options Real options theory is based on the Nobel Prize--winning work on financial options, and has captured the interest of executives, managers, and investors who need to understand the future profitability of an asset. Originally developed to value technology initiatives and companies, the method is now being applied broadly across various businesses and industries. The Real Options Solution offers comprehensive coverage of the real options approach with a five-step framework and examples for applying the author's unique total value model based on real options analysis. This approach will help executives and investors minimize the risk of committing to new ventures and delivers a framework flexible enough to apply to business initiatives in all types of companies.
The Timing Of Real Option Exercise
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Author : Jihe Song
language : en
Publisher:
Release Date : 2003
The Timing Of Real Option Exercise written by Jihe Song and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003 with categories.
This paper briefly reviews one recent development in real options modeling. This development aims to extend traditional real options models.We show that previous models are incomplete in that only the optimal action threshold is derived. The new literature provides further information on optimal option exercise.By introducing the first passage time approach, empirically testable propositions on the probability of option exercise and the expected time before an option is exercised are provided.
Technology Focused Acquisitions
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Author : Jan Paul Stein
language : en
Publisher: Walter de Gruyter GmbH & Co KG
Release Date : 2017-07-24
Technology Focused Acquisitions written by Jan Paul Stein and has been published by Walter de Gruyter GmbH & Co KG this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-07-24 with Business & Economics categories.
Technology-focused acquisitions are an important complement to the firm’s internal product development efforts. There is considerable heterogeneity when comparing individual technology-focused acquisitions – especially with respect to acquisition timing and the deal value. To resolve some of this heterogeneity the author introduces the novel distinction between performance- and functionality-focused acquisitions. He characterizes this distinction based on a theoretical analysis, a qualitative study, and turns to a sample of acquisitions in the field of artificial intelligence for the quantitative study. There are two key findings. First, performance-focused acquisitions take place earlier in a target’s life cycle than functionality-focused ones. Second, the deal value is – at a comparable stage in a target’s life cycle – higher for performance-focused acquisitions. This thesis is relevant for management scholars and managers alike: Scholars learn about the implications of the distinction between performance- and functionality-focused acquisitions on markets for technology. Managers gain insights into how this distinction may guide their strategic decision making.
Essays In Corporate Finance And Investment
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Author : Lin William Cong
language : en
Publisher:
Release Date : 2014
Essays In Corporate Finance And Investment written by Lin William Cong and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
This thesis consists of two essays that examine several problems in corporate finance and mechanism design. The central theme is endogenous agency conflicts and their impact on dynamic investment decisions. The first essay features auctions of assets and projects with embedded real options, and subsequent exercises of these investment options. The essay shows timing and security choice of auctions endogenously misalign incentives among agents and derives the optimal auction design and exercise strategy. The second essay studies implications of endogenous learning on irreversible investment decisions, in particular, how learning gives rise to asymmetric information between managers and shareholders in decentralized firms. Depending on the quality of the project, the optimal contract between principal and agent distorts investments in ways that has not been examined in the literature. Specifically, in Chapter 1 of the dissertation, I study how governments and corporations auction real investment options using both cash and contingent bids. Examples include sales of natural resource leases, real estate, patents and licenses, and start-up firms with growth options. I incorporate both endogenous auction initiation and post-auction option exercise into the traditional auctions framework, and show that common security bids create moral hazard because the winning bidder's real option differs from the seller's. Consequently, investment could be either accelerated or delayed depending on the security design. Strategic auction timing affects auction initiation, security ranking, equilibrium bidding, and investment; it should be considered jointly with security design and the seller's commitment level. Optimal auction design aligns investment incentives using a combination of down payment and royalty payment, but inefficiently delays sale and investment. I also characterize informal negotiations as timing and signaling games in which bidders can initiate an auction and determine the forms of bids. I show that post-auction investments are efficient and bidding equilibria are equivalent to those of cash auctions. However, in this setting, bidders always initiate the informal auctions inefficiently early. In addition, I provide suggestive evidence for model predictions using data from the leasing and exploration of oil and gas tracts, which leads to several ongoing empirical studies. Altogether, these results reconcile theory with several empirical puzzles and imply novel predictions with policy relevance. In Chapter 2, I examine learning as an important source of managerial flexibility and how it naturally induces information asymmetry in decentralized firms. Timing of learning is crucial for investment decisions, and optimal strategies involve sequential thresholds for learning and investing. Incentive contracts are needed for learning and truthful reporting. The inherent agency conflicts alter investment behavior significantly, and are costly to investors and welfare. But contracting on learning restores efficiency with low future uncertainty or sufficient liquidity. Unlike prior studies, the moral hazard of learning accelerates good projects and delays bad projects. Even the best type's investment is distorted, and only when learning is contractible can adverse selection dominate learning.