Friday, 7th May: 3.00pm

Can Real Options Be Made A Stand-alone Paradigm? From Risk Neutrality to Swiss Neutrality

Benoit Morel, Associate Teaching Professor
Engineering and Public Policy and Physics
Carnegie Mellon University

Financial option theory has changed the landscape in the pursuit of rigorous way to analyze decisions under uncertainty and risks. The extension to that theory outside of the confines of finances, the so-called “real option theory”, has not yet delivered on its early promises. It has developed into a cacophony of ad hoc approaches. In this talk I want to report on an attempt to ground the paradigm of real options on solid mathematical foundations.