Project valuation using real options analysis

In this work we are going to introduce the Real Options Analysis method for project valuation. The currently most used valuation methods (Discounted Cash Flow, Monte Carlo Simulation, Decision Tree Analysis) will be described and analyzed; we will show how Real Options Analysis can overcome their limitations. A six steps framework for the resolution of a valuation problem using the binomial technique will be introduced. Examples of application of the method will precede the conclusions