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A Credibilistic Real Options Model with an Optimism-Pessimism Measure Using Trapezoidal Fuzzy Numbers

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Intelligent and Fuzzy Techniques for Emerging Conditions and Digital Transformation (INFUS 2021)

Part of the book series: Lecture Notes in Networks and Systems ((LNNS,volume 307))

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Abstract

Real options valuation models can capture the value effects of flexibility, which net-present-value models cannot do properly. This type of optionalities are typical in long-term strategic investments as well as in evaluations of public policies. The original credibilistic fuzzy pay-off method for real options valuation is extended with trapezoidal fuzzy numbers and \({m}_{\lambda }\)-measure of an analyst’s optimism-pessimism level. The optimism-pessimism measure is a convex combination of possibility and necessity measures. Fuzzy and crisp real options values, ROVs, are generated using fuzzy numbers and the λ parameter for the \({m}_{\lambda }\)-measure. A new credibilistic real options model is presented by incorporating the optimism-pessimism measure and the model outcomes with varying values of λ are compared to the ROVs from the original credibilistic fuzzy pay-off model in the context of M&A synergies valued ex-ante, before an actual M&A integration process, from an acquiring company perspective. The main contributions of the paper include a theorem that gives a formula for the computation of the expected value of the positive part of a trapezoidal fuzzy number with respect to \({m}_{\lambda }\)-measure and the demonstration of the real-world applicability of the model through a numerical example.

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Author information

Authors and Affiliations

  1. Bucharest University of Economics, Bucharest, Romania

    Irina Georgescu

  2. Åbo Akademi University, Turku, Finland

    Jani Kinnunen

Authors
  1. Irina Georgescu
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  2. Jani Kinnunen
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Corresponding author

Correspondence to Jani Kinnunen .

Editor information

Editors and Affiliations

  1. Department of Industrial Engineering, Istanbul Technical University, Istanbul, Turkey

    Cengiz Kahraman

  2. Industrial Engineering Department, Yildiz Technical University, Istanbul, Turkey

    Selcuk Cebi

  3. Department of Industrial Engineering, Istanbul Technical University, Istanbul, Turkey

    Sezi Cevik Onar

  4. Department of Industrial Engineering, Istanbul Technical University, Istanbul, Turkey

    Basar Oztaysi

  5. Industrial Engineering Department, Galatasaray University, Istanbul, Turkey

    A. Cagri Tolga

  6. Department of Industrial Engineering, Istanbul Technical University, Istanbul, Turkey

    Irem Ucal Sari

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Georgescu, I., Kinnunen, J. (2022). A Credibilistic Real Options Model with an Optimism-Pessimism Measure Using Trapezoidal Fuzzy Numbers. In: Kahraman, C., Cebi, S., Cevik Onar, S., Oztaysi, B., Tolga, A.C., Sari, I.U. (eds) Intelligent and Fuzzy Techniques for Emerging Conditions and Digital Transformation. INFUS 2021. Lecture Notes in Networks and Systems, vol 307. Springer, Cham. https://doi.org/10.1007/978-3-030-85626-7_12

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