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Real Options Valuation

The Importance of Interest Rate Modelling in Theory and Practice

  • Book
  • © 2010

Overview

Authors:
  1. Marcus Schulmerich

    1. State Street Global Advisors (SSgA), Vice President, München, Germany

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  • Systematic analysis based on simulation and historical background
  • Necessary theory is provided
  • New: covering the time period of the financial crisis 2008
  • Includes supplementary material: sn.pub/extras

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Table of contents (6 chapters)

  1. Front Matter

    Pages i-xviii
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  2. Introduction

    • Marcus Schulmerich
    Pages 1-20

  3. Real Options in Theory and Practice

    • Marcus Schulmerich
    Pages 21-69

  4. Stochastic Models for the Term Structure of Interest Rates

    • Marcus Schulmerich
    Pages 71-131

  5. Real Options Valuation Tools in Corporate Finance

    • Marcus Schulmerich
    Pages 133-195

  6. Analysis of Various Real Options in Simulations and Backtesting

    • Marcus Schulmerich
    Pages 197-361

  7. Summary and Outlook

    • Marcus Schulmerich
    Pages 363-374

  8. Back Matter

    Pages 375-389
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Keywords

About this book

After the ?rst edition of this book was published in early 2005, the world has changed dramatically and at a pace never seen before. The changes that - curred in 2008 and 2009 were completely unthinkable two years before. These changes took place not only in the Finance sector, the origin of the crisis, but also, as a result, in other economic sectors like the automotive sector. Governments now own substantial parts, if not majorities, in banks or other companies which recorded losses of double digit billions of USD in 2008. 2008 saw the collapse of leading stand-alone U. S. investment banks. In many co- tries interest rates fell close to zero. What has happend? While the economy showed strong growth in 2004 to 2006, the Subprime or Credit Crisis changed the picture completely. What started in the U. S. ho- ing market in late 2006 became a full-?edged global ?nancial crisis and has a?ected ?nancial markets around the world. A decline in U. S. house prices and increasing interest rates caused a higher rate of subprime mortgage delinqu- cies in the U. S. and, due to the wide distribution of securitized assets, had a negative e?ect on other markets. As a result, markets realized that risks had been underestimated and volatility increased. This development culminated in the bankruptcy of the investment bank Lehman Brothers in mid September 2008.

Authors and Affiliations

  • State Street Global Advisors (SSgA), Vice President, München, Germany

    Marcus Schulmerich

About the author

Marcus Schulmerich received his doctoral degree with Prof. Ulrich Hommel, Ph.D., Endowed Chair of Corporate Finance and Capital Markets at the ebs Business School in Wiesbaden, Germany. He is a Mathematician by training, focusing on Financial Engineering, and earned his MBA from the M.I.T. Sloan School of Management in Cambridge, MA / USA.

Dr. Schulmerich works as a Product Specialist for quantitative equity and hedge fund strategies with State Street Global Advisors (SSgA) in Munich, Germany, covering the complete EMEA region (Europe, Middle East and Africa). He is a frequent guest lecturer at the ebs and other universities for courses in "Financial Engineering", "Risk Management" and "Derivatives" and publishes regularly on Finance and Asset Management in newspapers, magazines and books.

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