---------------------- Forwarded by Vince J Kaminski/HOU/ECT on 07/11/2000 
08:56 AM ---------------------------


Steven Leppard
06/21/2000 04:13 AM
To: Vince J Kaminski/HOU/ECT@ECT, Grant Masson/HOU/ECT@ECT, Stinson 
Gibner/HOU/ECT@ECT, Zimin Lu/HOU/ECT@ECT, Olivier Herbelot/LON/ECT@ECT, Soma 
Ghosh/LON/ECT@ECT
cc:  
Subject: New real options presentation

All

Attached in the latest version of my real options presentation, which I'll be 
presenting at a Real Options Group conference in Cambridge next month.

I've removed the gas storage pricing example, and instead put in a simple 
example to show that my method can reproduce decision tree approaches (should 
one wish to do so).  This is a response to the heavily decision-tree 
dominated approach taken by most people at the last conference I spoke at.  I 
want to demonstrate explicitly that my approach covers both decision tree and 
option pricing as special cases, the synthesis needed for correct real option 
valuation.

My presentation now covers:
1. Decision trees.
2. Binomial option pricing trees.
3. Power station valuation.
4. Power asset development.
The option pricing and power examples are based on the (too simplistic) 
binomial tree method.  I obviously won't indicate my thoughts on the most 
correct way to do this.

Steve