About the Software

This book uses two software tools to implement real option models.

DPL™ by Syncopation Software is a state-of-the-art decision tree analysis tool used extensively throughout this book. As the title implies, a decision analysis approach is used, as pioneered by Luiz Brandão, Jim Dyer and Joe Hahn in their 2005 Decision Analysis article “Using Binomial Decision Trees to Solve Real-Option Valuation Problems”. While the decision trees in DPL are more computationally intensive than the typical binomial lattice framework that appears in finance, the processing speed of modern laptop computers minimize this potential issue. Additionally, decision trees in DPL provide a visual modeling approach that makes communicating key valuation findings much easier. Given the complexity that real option problems often pose, DPL software provides a simple and intuitive interface helpful for students and professional alike.

If you are using this book as part of a university course, such as DESC 621 “Valuation of Real Options” at the Pepperdine Graziadio Business School, DPL will be provided to you. For faculty at other institutions interested in adopting this book, they are encouraged to contact sales@syncopation.com to inquire about an academic site license. For those interested in self-study, a complimentary 30-day trial version of DPL 9 can be obtained from https://www.syncopation.com/dpl-professional-trial.

Excel® by Microsoft is also used as a general purpose modeling tool, which in a spreadsheet format, has nearly ubiquitous adoption by business analysts. In this book, it provides a framework for project valuation without options present using the discounted cash flow method. It also provides a suitable, although not ideal, support for simulation of European option valuation.

Lastly, all DPL and Excel files referenced in the book and many solutions files in DPL are provided in the book companion website at https://sites.google.com/view/real-options.