Real Options in Practice

Rating:
Summary: Good overview but the editor was asleep
Review: Brach covers the theory sufficiently; however, her attempts to apply the threory to practical examples is weak at best. Three problems became major distractions for me and ultimately led to my not completing the book. First, examples cited within the book are very difficult to follow. Fairly important components of example equations fall from the sky with little explantion as to how they were determined. Second, there are inconsistencies between stated assumptions and mathmatical examples. This particular distraction is evident in the discount rates cited and used for calculations. Third, (I may be mistaken) but there may be variations in option valuing approaches that contradict Brach's methodology. By not addressing these variations ultimately leads the attentative reader to numerous unanswered questions.

Overall, it is a nice book that addresses the overall mechanics in an understandable fashion...even considering the problems with the examples. However, for those wishing the end-all-be-all real option reference book...Keep Looking.

Rating:
Summary: Disappointment
Review: I was really excited when I bought this book since I needed a guide on "real" approach in evaluating real options. This book is definitely different from any other book on the issue of real options on the market. It deals with some very interesting concepts such as that volatility is not always profitable in real options. There, Brach bases her work on Huchzermeier and Loch but unfortunately is rather unconvincing in her explanation.
However I got really frustrated, when I tried solving some of her examples of valuating options. They are marred by numerous simple algebraic errors, making the whole example useless. (e.g. p. 99 fig. 3.21 - values of the stage options are incorrect)
As one of the previous reviewers had noted, Brach doesn't seem very confident with her maths and many of her examples are incomplete and hard to follow.
In short, if you want to read something "easy" and interesting about real options then this is your choice. However, don't expect this book to be a real guide in your everyday dealing with real options.

Rating:
Summary: Highly Recommended!
Review: No financial innovation of the past half-century has been more important than option analysis. The notion that option analysis could help corporate managers make more effective investment decisions was bold news in the early 1980's, but did not make much of an impact beyond rather narrow circles. Options are hard to understand - the math can be intimidating and few people have been able to explain option analysis in a way that makes sense to the financial laity. This book is, therefore, long overdue. Marion A. Brach delivers the essential logic and analytical framework of real options to any corporate manager. The text can be heavy going at times, and the author has an annoying habit of referring to examples without explaining them (footnotes cite other publications where explanations may be found). Still, we recommend this book highly. It shows why there is more to management decisions than many managers may have heretofore considered.