Fuzzy Game-based Real Option Analysis in competitive investment situation

Tanatch Tangsajanaphakul, Junzo Watada

    Research output: Chapter in Book/Report/Conference proceedingConference contribution

    Abstract

    In real option pricing, it is impractical to assume the net present value of expected cash flow payoff as an exact number because it is a forecasted vague one. The price can be defined as a fuzzy number to express its estimated uncertain values and the Binomial Tree is used to price a real option. A modified pricing approach to real options is thus proposed to transform the forecasted uncertain values evaluated by experts into some normal fuzzy numbers. Futthermore, Fuzzy Game is employed to find optimal strategy. The paper's objective is to propose the method that fulfills the lacking competitive view in investment decision making. The approach consistes of the combination of Real Option Analysis and Game Theory. The integration of these two methods helps a decision maker to view uncertainty of the project from competition perspective. A real investment case is given to illustrate the validity of the proposed approach.

    Original languageEnglish
    Title of host publicationProceedings - 2011 5th International Conference on Genetic and Evolutionary Computing, ICGEC 2011
    Pages381-384
    Number of pages4
    DOIs
    Publication statusPublished - 2011
    Event5th International Conference on Genetic and Evolutionary Computing, ICGEC2011 - Xiamen
    Duration: 2011 Aug 292011 Sep 1

    Other

    Other5th International Conference on Genetic and Evolutionary Computing, ICGEC2011
    CityXiamen
    Period11/8/2911/9/1

    Keywords

    • Expected cash flow payoff
    • Fuzzy Game
    • Game theory
    • Normal fuzzy number
    • On distance between fuzzy variables
    • Real option pricing

    ASJC Scopus subject areas

    • Computational Theory and Mathematics
    • Computer Science Applications

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  • Cite this

    Tangsajanaphakul, T., & Watada, J. (2011). Fuzzy Game-based Real Option Analysis in competitive investment situation. In Proceedings - 2011 5th International Conference on Genetic and Evolutionary Computing, ICGEC 2011 (pp. 381-384). [6042806] https://doi.org/10.1109/ICGEC.2011.102