Home  Journals  Financial Analytics: Science and Experience  29(311) - 2016 August

Real option as a way to minimize the risk of project financing in commercial banks

Vol. 9, Iss. 29, AUGUST 2016

Article PDF Version

Received: 1 July 2016

Received in revised form: 14 July 2016

Accepted: 28 July 2016

Available online: 16 August 2016

Subject Heading: RISK, ANALYSIS AND EVALUATION

JEL Classification: G21

Pages: 49-60

Importance The article considers the possibility of and the need for evaluation of bank investment projects using real options within the framework of banking risk management. Project financing risks are the object of study; an analysis of real options as a way to minimize these risks is the subject of study.
Objectives The paper aims to develop an optimal method to minimize risk when evaluating an investment project that will enable the Bank to efficiently manage and receive income from project financing in the conditions of market uncertainty.
Methods For the study, I used qualitative and quantitative methods of analysis.
Results I state the desirability of improving the methodology for the evaluation of investment projects within the banking risk management framework and define a way to assess the project, reducing the risk of project financing.
Conclusion and Relevance I conclude that to minimize the risk in project financing, bank managers, when assessing the investment project, should use a real option analysis. Using the proposed method of real options is one of the innovative approaches to valuation of assets.

Keywords: financing, risk, investment project, real option, commercial bank

References:

1. Bulgakova L.G. [A role of banks in financing investment projects]. Bankovskoe delo = Banking, 2013, no. 1, pp. 45–51. (In Russ.)
2. Dadasheva O.Yu. [Enhancing the investment banking activity]. Bankovskoe delo = Banking, 2011, no. 7, pp. 64–70. (In Russ.)
3. Moskvin V.A. Upravlenie riskami pri realizatsii investitsionnykh proektov. Rekomendatsii dlya predpriyatii i kommercheskikh bankov [Investment project risk management. Recommendations for banks]. Moscow, Finansy i statistika Publ., 2004, 352 p.
4. Rusanov Yu.Yu., Rusanova O.M. Chistye riski i shansy v realizatsii vnutrennei bankovskoi politiki: monografiya [Pure risks and chances of implementation of internal banking policies: a monograph]. Germany, LAP LAMBERT Academic Publishing, 2014, 128 p.
5. Sekerin V.D., Gorokhova A.E. Otsenka investitsii: monografiya [Investment appraisal: a monograph]. Moscow, ARGAMAK-MEDIA Publ., 2013, 152 p.
6. Grishina S.A. [An optional approach to assessing the efficiency of investment projects]. Bankovskie uslugi = Banking Services, 2011, no. 10, pp. 6–12. (In Russ.)
7. Zvonova E.A. Den'gi, kredit, banki [Money, credit, banking] Moscow, INFRA-M Publ., 2012, 592 p.
8. Gusev A.A. Real'nye optsiony v otsenke biznesa i investitsii: monografiya [Real options in business and investment valuation: a monograph]. Moscow, RIOR Publ., 2009, 118 p.
9. Abramov G.F., Malyuga K.A. [Evaluation of investment projects using real options]. Naukovedenie, 2014, no. 2, pp. 10–19. (In Russ.) Available at: Link.
10. Mun J. Real Options Analysis: Tools and Techniques for Valuing Strategic Investments and Decisions. Hoboken, John Wiley & Sons, 2006, 704 p.
11. Kodukula P., Papudesu Ch. Project Valuation Using Real Options. India, Thomson Press, 2009, 382 p.
12. Potasheva G.A. Proektnoe finansirovanie: sinergeticheskii aspekt [Project financing: a synergetic aspect]. Moscow, INFRA-M Publ., 2015, 384 p.

View all articles of issue

ISSN 2311-8768 (Online)
ISSN 2073-4484 (Print)

Journal current issue

Vol. 17, Iss. 1 March 2024

Archive