BU5556 - Real Options & Decision Making

Credit Points: 15

Course Co-ordinator: Professor Jospeh Swierzbinski,

Pre-requisite(s): This course will be compulsory for students on the International Business Energy & Petroleum programme.

Co-requisite(s): Students must follow this course alongside the other core, compulsory components of their degree programme.

Note(s): None.

The course will introduce concepts from economics and finance related to investment under uncertainty and consider some of the methods that have been developed in these fields, such as the Black-Scholes equation and binomial option pricing model. The course will also review examples that show how methods originally developed to assess financial investments can be adapted to evaluate investments in real assets, such as machinery or oil leases. Examples of the types of investment decision that may be considered in this course include: (1) the option to defer an investment such as the development of a leased tract which may contain oil; (2) the conduct of a research programme for producing information such as a programme of exploration for oil; and (3) the option to abandon or suspend a project.

1x 2hr lectures, for 12 weeks. 1x 1hr tutorial for 6 weeks.

1x 2hr written examination (80%) and one assessed assignment/essay (20%).