Options on shipbuilding contracts
Name
42243109-MIT.pdf
Description
Full printable version
Size
6.46 MB
Format
Adobe PDF
Checksum (MD5)
8817d11cca8d5b38ed09ad180843cac8
Author(s)
Høegh, Morten W. (Morten Westyne), 1973-
Advisor(s)
Henry S. Marcus.
Date Issued
1998
Publisher
Massachusetts Institute of Technology
Abstract
Analysis of investment projects and strategic decisions using option theory has gained wide acceptance among corporate finance scholars and professionals. In the shipping and shipbuilding industries, option analysis is still in its infancy, and few professionals are familiar with option valuation tools. At the same time, practically all shipbuilding contracts contain option elements, the value of which most industry players do not know how to calculate. Newbuilding options give shipowners closing newbuilding contracts a right, but not an obligation, to enter into additional newbuilding contracts, with predetermined terms, at a later date. This thesis presents a general introduction to option theory as it applies to traded financial securities. This framework is extended to newbuilding options. Characteristics of the newbuilding markets are given, and fundamental stochastic processes that can describe newbuilding prices are introduced. Based on these stochastic processes, closed-form formulas for calculating the value of newbuilding options are presented. Actual observations of shipbuilding prices are analyzed in the context of the stochastic models. The results of this analysis are discussed as they apply to the option formulas and to the practical aspects of the newbuilding option framework. Recommendations are given on how to analyze real cases in which newbuilding options appear.
Description
Thesis (S.B. and S.M.)--Massachusetts Institute of Technology, Dept. of Ocean Engineering, 1998.
Includes bibliographical references (p. 123-124).
Subjects
Ocean Engineering
MIT Department
Massachusetts Institute of Technology. Department of Ocean Engineering
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