Real Options at Bell Canada

In this report, we first develop a simplified example that illustrates the importance of considering the option ``waiting to invest'' when valuing an investment. This is followed by a short description of other options that could be embedded in an investment opportunity. In order to stress the importance of the real option mind-set in strategic planning and competitive assessment, we present three examples of possible applications of real options for evaluating investments at Bell Canada. A brief discussion follows on the importance of a real options mind-set in the telecommunications regulation context. Finally we conclude by underlining the importance of an efficient information gathering and processing framework to implement a real options framework. Two technical appendices provide more details on both the modeling and the solving techniques that are commonly used to implement real options. The complete version of this publication is confidential. Nous débutons ce rapport en développant un exemple simplifié qui illustre l'importance de valoriser l'option de retarder un investissement. Une courte description des différentes options susceptibles d'être incorporées dans un projet d'investissement est ensuite donnée. Pour illustrer l'importance d'adopter un cadre d'analyse basé sur la méthodologie des options réelles pour la planification stratégique et l'analyse concurrentielle, nous présentons trois applications possibles d'options réelles dans l'évaluation d'investissements chez Bell Canada. La nécessité de l'adoption d'un tel cadre d'analyse dans le contexte de la réglementation des télécommunications fait ensuite l'objet d'une brève discussion. Nous terminons en soulignant que le succès de la mise en pratique d'un cadre «options réelles» dépend essentiellement d'un système efficace de collecte et de traitement de l'information. Deux appendices techniques fournissent plus de détails sur les techniques de modélisation et de solution qui sont couramment utilisées pour des problèmes d'options réelles. La version complète de cette publication est confidentielle.Real options, option value, volatility, risk, irreversibility, telecommunications, Options réelles, valeur d'option, volatilité, risque, irréversibilité, télécommunications

Environmental Impact Assessment and Investment under Uncertainty. An Application to Power Grid Interconnection

We consider a firm that must undergo a costly and time-consuming regulatory process before making an irreversible, lagged investment whose value varies randomly. We analyze two cases: regulatory approval is valid forever or it expires after some time. We apply our model to Hydro-Québec's project of building a 1250 megawatts interconnection with Ontario. We find that the firm may start the regulatory process earlier if regulatory approval is valid long enough or if uncertainty is high enough; it postpones it otherwise. When to start the regulatory process and when to invest depend on the duration of the regulatory green light.Regulation, uncertainty, irreversibility, real options, interconnections

Environmental Impact Assessment and Investment under Uncertainty. An Application to Power Grid Interconnection.

We consider a firm that must undergo a costly and time-consuming regulatory process before making an irreversible, lagged investment whose value varies randomly. We analyze two cases: regulatory approval is valid forever or it expires after some time. We apply our model to Hydro-Québec's project of building a 1250 megawatts interconnection with Ontario. We find that the firm may start the regulatory process earlier if regulatory approval is valid long enough or if uncertainty is high enough; it postpones it otherwise. When to start the reglulatory process and when to invest depend on the duration of the regulatory green light.Regulation, uncertainty, irreversibility, real options; interconnections

Environmental Impact Assessment and Investment under Uncertainty: An Application to Power Grid Interconnection

We consider a firm that must undergo a costly and time-consuming regulatory process before making an irreversible, lagged investment whose value varies randomly. We analyze two cases: regulatory approval is valid forever or it expires after some time. We apply our model to Hydro Québec's project of building a 1250 megawatts interconnection with Ontario. We find that the firm may start the regulatory process earlier if regulatory approval is valid long enough or if uncertainty is high enough; it postpones it otherwise. When to start the regulatory process and when to invest depend on the duration of the regulatory green light. Nous considérons une firme qui doit se soumettre à un processus réglementaire long et coûteux avant de réaliser un investissement irréversible. La valeur de cet investissement est aléatoire et un délai de mise en service est nécessaire. Nous analysons deux cas : l'approbation réglementaire est toujours valide ou elle a une durée finie. Nous appliquons notre modèle à un projet d'Hydro Québec : la construction d'une interconnexion de 1250 mégawatts avec l'Ontario. Nous montrons que la firme débute le processus réglementaire plus tôt si l'approbation réglementaire est suffisamment longue ou si l'incertitude est assez élevée; autrement elle le retarde. Ces décisions dépendent aussi de la durée de l'approbation réglementaire.regulation, uncertainty, irreversibility, real options, interconnections, réglementation, incertitude, irréversibilité, options réelles, interconnexions

‘‘Healthy,’’ ‘‘diet,’’ or ‘‘hedonic’’ : how nutrition claims affect food-related perceptions and intake?

The main purpose of this study was to investigate the impact of nutrition claims on food perceptions and intake among adult men and women, during ad libitum snacks. In a three (healthy vs. diet vs. hedonic) by two (normal-weight vs. overweight/obese) by two (unrestrained vs. restrained eaters) factorial design, 164 men and 188 women were invited to taste and rate oatmeal-raisin cookies. Despite the fact that the cookies were the same in all conditions, they were perceived as being healthier in the “healthy” condition than in the “diet” and “hedonic” conditions. The caloric content was estimated as higher by participants in the “hedonic” than in the “healthy” condition, by women than by men, and by restrained than by unrestrained eaters. Although measured ad libitum cookie intake did not differ as a function of experimental condition, overweight restrained men ate more than did women from each BMI and restraint category. Conversely, overweight restrained women ate less than did men from each BMI and restraint category. In conclusion, our manipulations of healthiness and “fatteningness” of food were effective in changing perceptions, but were not in changing behavior

Évaluation de projets : la valeur actualisée nette optimisée (VAN-O)

Nous clarifions les fondements de l’évaluation de projet en présence de multiples sources de risque et nous concluons que la méthode VAN telle qu’appliquée dans la plupart des entreprises et organisations viole certains principes fondamentaux de la création de valeur tels l’additivité et l’absence d’arbitrage. L’évaluation d’un projet doit se faire en (i) décomposant les flux monétaires en composantes correspondant aux diverses sources de risque et (ii) actualisant chaque composante à l’aide d’un taux spécifique à cette composante. La valeur du projet est obtenue en sommant les valeurs présentes des diverses composantes. Alternativement, les différentes composantes peuvent être corrigées pour leur risque respectif afin d’obtenir leurs équivalents certains. La valeur du projet est alors obtenue en prenant la somme des équivalents certains actualisée au taux sans risque, identique, unique et observable.We clarify the foundations of project evaluation under multiple risk sources and we show that the way the NPV method is typically applied in most firms and organizations violates some fundamental principles of value creation such as the additivity and absence of arbitrage principles. Project evaluation must be done through (i) decomposing the project cash flows into components corresponding to the different sources of risk and (ii) obtaining the present value of each component with a specific risk-adjusted discount rate. The value of the project is obtained as the sum of the present values so obtained. Alternatively, the different components can be corrected for their respective risk to obtain their certainty equivalents. The value of the project is then obtained as the sum of those certainty equivalents discounted at the unique, observable, identical, risk free rate

A Real Options Analysis of TransEuropean Telecommunications Wireline Video Deployment

L'objectif de ce cahier est de montrer comment la méthodologie des options réelles peut être appliquée pour évaluer les projets d'investissement de TransEurope Communications (TEC). Bien que réaliste, l'investissement considéré ici est purement fictif. La conclusion principale de l'exercice est à l'effet qu'on ne peut pas concevoir une stratégie d'investissement optimale si on n'évalue pas de manière explicite la flexibilité managériale de façon appropriée.The goal of this paper is to demonstrate how the RO methodology can be applied to evaluate TransEurope Communications (TEC) investment projects. Although realistic, the business case analysed here is fictional. The main conclusion and lesson of this exercise is: One cannot determine a value maximizing investment strategy if one does not value managerial flexibility in an appropriate way

Évaluation options réelles du projet VEGA de Northern Canada Gas

Nous avons procédé à une évaluation du projet VEGA de Northern Canada Gas (NCG) dans le but de montrer comment l'approche options réelles peut s'appliquer à ce type de projet. Bien que réaliste, cette étude est basée sur un cas fictif. Ainsi, elle se veut plutôt exploratoire quant à l'application éventuelle de l'approche à l'évaluation des investissements

Error-Tolerant Anytime Approach to Plan Recognition Using a Particle Filter

Classical plan recognition approaches require restrictive assumptions and are generally off-line. However, many real-world plan recognition applications must deal with real-time constraints, noisy information, temporal relations in actions, agent preferences, and so on. Many existing approaches have tried to relax assumptions, but none can deal with the above-cited needs. This paper proposes an extension of previous works on plan recognition based on plan tree grammar. Our anytime topdown approach uses a particle filter. This approach manages to give a quick reliable solution to the plan recognition problem while dealing with noisy observations and without reducing the expressiveness of plan libraries. Empirical results on simulated problems show the efficiency of our approach

Logs analysis of adapted pedagogical scenarios generated by a simulation serious game architecture

This paper presents an architecture designed for simulation serious games, which automatically generates game-based scenarios adapted to learner's learning progression. We present three central modules of the architecture: (1) the learner model, (2) the adaptation module and (3) the logs module. The learner model estimates the progression of the development of skills targeted in the game. The adaptation module uses this estimation to automatically plan an adapted sequence of in-game situations optimizing learning. We implemented our architecture in Game of Homes, a simulation serious game, which aims to train adults the basics of real estate. We build a scripted-based version of Game of Homes in order to compare the impact of scripted-based scenarios versus generated scenarios on learning progression. We qualitatively analyzed logs files of thirty-six adults who played Game of Homes for 90 minutes. The main results highlighted the specificity of the generated pedagogical scenarios for each learner and, more specifically, the optimization of the guidance provided and of the presentation of the learning content throughout the game