Last modified: 31 May 2022 13:05
The goal of this course is to deepen and broaden students' understanding and develop their analytical skills regarding investment decisions under uncertainty and the value of flexibility and information. The course will introduce relevant concepts from economics and finance such as decision trees, the Black-Scholes equation and the binomial option pricing model and discuss how these concepts may be applied to assess investments with applications related to the energy industry such as the development of an oil lease.
| Study Type | Postgraduate | Level | 5 |
|---|---|---|---|
| Term | Second Term | Credit Points | 15 credits (7.5 ECTS credits) |
| Campus | Aberdeen | Sustained Study | No |
| Co-ordinators |
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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.
Information on contact teaching time is available from the course guide.
Alternative Assessment
1 x 2000-word essay (40%)
2 x Quantitative Problem Sets (60%)
There are no assessments for this course.
| Knowledge Level | Thinking Skill | Outcome |
|---|---|---|
| Factual | Remember | ILO’s for this course are available in the course guide. |
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