Investment timing in African private equity: A real options analysis
Date
2021
Authors
Achacha, Linda Yunia
Journal Title
Journal ISSN
Volume Title
Publisher
Strathmore University
Abstract
This paper modifies the standard binomial option pricing approach to real options analysis so
as to incorporate exogenous volatility. Real options allow a manager to gather information
about a potential investment payoff prior to investment occurring . The focal point of this paper
is to uncover the value that deferral options have in regard to investment decisions and to
determine the optimal investment timing given macroeconomic conditions. The results show
that enhanced value is yielded by deferral options in instances of higher exogenous volatility
and that the most optimal investment outcomes are achievable when there is higher volatility
which is proven by the complete elimination of downward movement investment loss.
Description
Submitted in fulfilment of the requirements for the Bachelor of Business Science in Finance Degree at Strathmore University