Modeling Risk: Applying Monte Carlo Simulation, Real Options Analysis, Forecasting, and Optimization
2nd Edition (Wiley, 2006) NEW

The books is now released and available on Amazon! This book will use all three software: Risk Simulator, Real Options Super Lattice Solver, and Employee Stock Options Valuation Toolkit. It shows how these different methodologies are used in concert with one another in a comprehensive and integrated risk analysis and risk management paradigm. This book is a completely updated version of the older Applied Risk Analysis text. The updates include NINE detailed new business cases and dozens of applied cases (U.S. Military strategy, Boeing's global systems of systems, biotech deal licensing, oil and gas exploration, manufacturing real estate, personal financial planning, employee stock options valuation under FAS123, and many more)!

Every year the market of managerial books is flooded again and again. This book is different. It puts a valuable tool into the hands of corporate managers who are willing to stand up against uncertainties and risks and are determined to deliver value to shareholder and society, even in rough times. It is a book for the new generation of managers, for whom Corporate America is waiting."

–Dr. Markus Götz Junginger, Managing Partner, IBCOL Consulting AG (Switzerland)

Dr. Mun breaks through the hyperbole and presents a clear step-by-step approach revealing to readers how quantitative methods and tools can truly make a difference. In short, he teaches you what's relevant and a ‘must know.’ I highly recommend this book, especially if you want to effectively incorporate the latest technologies into your decision making process for your real world business."

–Dr. Paul W. Finnegan, MD, MBA, Vice President, Commercial Operations and Development, Alexion Pharmaceuticals, Inc.

"A must read for product portfolio managers . . . it captures the risk exposure of strategic investments, and provides management with estimates of potential outcomes and options for risk mitigation."

–Rafael Gutierrez, Exec. Director of Strategic Marketing Planning, Seagate Technology

"Johnathan Mun has previously published a number of very popular books dealing with different aspects of risk analysis-associated techniques and tools. This last publication puts all the pieces together. The book is really unavoidable for any professional who wants to address risk evaluation following a logical, concrete and conclusive approach."

–Jean Louis Vaysse, Deputy Vice President Marketing, Airbus (France)

Real Options Analysis: Tools and Techniques, 2nd Edition (Wiley, 2005)  NEW!

Real Options Analysis, 2nd edition provides a novel view of evaluating capital investment strategies by taking into consideration the strategic decision-making process. The book provides a qualitative and quantitative description of real options, the methods used in solving real options, why and when they are used, and the applicability of these methods in decision making. In addition, multiple business cases and real-life applications are discussed. This includes presenting and framing the real options problems, as well as introducing a stepwise quantitative process developed by the author for solving these problems using the different methodologies inherent in real options. Included are technical presentations of models and approaches used as well as their theoretical and mathematical justifications. The book is divided into three parts: the qualitative discussions of real options; the quantitative analysis and mathematical concepts; and practical applications. The first part looks at the qualitative nature of real options, providing actual business cases and scenarios of real options in the industry, as well as high-level explanations of how real options provide the much-needed insights in decision making. The second part of the book looks at the step-by-step quantitative analysis, complete with worked-out examples and mathematical formulae. The third part illustrates the use of the Real Options Valuation’s Super Lattice Solver software and Risk Simulator software both developed by the author and included in the enclosed CD-ROM (standard 30-day trial with extended academic license). In this section, more detailed business cases are solved using the software.

This second edition provides many updates including:

• A trial version and introduction to the Super Lattice Solver software that supersedes the author’s older Real Options Analysis Toolkit software (all bugs and computational errors have been fixed and verified).

• A trial version and introduction to the Risk Simulator software also created by the author.

• Extended examples and step-by-step computations of American, Bermudan, European, and Customized options (including abandon, barrier, chooser, contraction, expansion, and other options).

• More extensive coverage of advanced and exotic real and financial options (multiple-phased sequential compound options, complex sequential compound option, barrier options, trinomial mean-reverting options, quadranomial jump-diffusion options, pentanomial dual-asset rainbow options, multiple-asset with multiple-phased options, engineering your own exotic options, and so forth).

• Extended real options cases with step-by-step worked out solutions using the Super Lattice Solver software.

• Several brand new case studies on applying real options in the industry.

• An extended discussion on volatility estimates, risk, and uncertainty.

This book is targeted at both the uninitiated professional as well as those well-versed in real options applications. It is also applicable for use as a second-year M.B.A. level textbook or introductory Ph.D. reference book.

“…this book is a must have and must read… Dr. Mun’s new book is a refreshing, cutting-edge look at a powerful new decision-making process… it isn’t often you can truthfully say a book breaks new ground, but [this book] has certainly done that.”

-Glenn G. Kautt, President, Monitor Group, Inc. (USA)

“Many books on real options can be intimidating. Dr. Mun offers a pragmatic, reliable and entertaining guide. Complex concepts and formulas are brilliantly interspersed with well chosen examples and step-by-step walk through from a variety of industries.”

-Shota Hattori, President and CEO, Kozo Engineering, (Japan)

“Real Options Analysis is the clearest book on real options that we have read to date.  It does an excellent job of demystifying a difficult and complex subject.  It provides a solid basis for conceiving, assessing and evaluating real option investments, which will make it useful to practitioners and students alike.”

-Prof. Ian C. MacMillan, Ph.D., Professor, The Wharton School of the University of Pennsylvania (USA)

“…the clarity and comprehensive coverage makes it the best guide for all practitioners… coupled with state-of-the-art financial tools CD-ROM.”

-Michael Sim, Partner, Moores Rowland International (Hong Kong)

“Dr. Johnathan Mun certainly has earned the reputation of being an expert on the subject… consultants, analysts, decision-makers and engineers will be all over this book and its software.”

-Phyllis Koessler, Managing Director, Koessler and Associates (Switzerland)

“…finally, a real options analysis book that is technically sophisticated enough to be useful, and practically written so that it can actually be used. It is destined to become the handbook of real options.”

-Tracy Gomes, CEO, Intellectual Property Economics (USA)

“Dr. Mun demystifies real options analysis and delivers a powerful, pragmatic guide for decision-makers and practitioners alike. Finally, there is a book that equips professionals to easily recognize, value, and seize real options in the world around them.”

- Jim Schreckengast, Sr. Vice President, R&D Strategy – Gemplus International SA (France)

“...written from the viewpoint of an educator and a practitioner, his book offers a readable reference full of insightful decision-making tools to satisfy both the novice and the experienced veteran.”

-Prof. Richard Kish, Ph.D., Associate Professor of Finance, Lehigh University (USA)

“Dr. Mun has converted his tacit financial knowledge into a digestible user-friendly book. He effectively leads the reader on a solid path starting from discounted cash flow, progressing through Monte Carlo analysis and evolving to real options to get even closer to the target of achieving confident corporate decisions. His ability to clearly explain the relationships of popular competing analysis methods will make this a must have reference book for today's decision makers.”

-Prof. Ken English, Director of R&D, The Timken Company (USA)

“The book leads the field in real options analytics and is a must-read for anyone interested in performing such analyses. Dr. Mun has made a formidable subject crystal clear and exponentially easy for senior management to understand. Monte Carlo simulation and real options software alone is worth the book price many times over.”

-Morton Glantz, Renowned educator in finance, author of several books, financial advisor to government (USA)

Valuing Employee Stock Options Under 2004 FAS 123 (Wiley Finance, 2004)

The Financial Accounting Standards Board (FASB) released a Proposed Statement of Financial Accounting Standards (FAS) in 2004 that amended earlier FAS Statements 123 and 95. Soon after, the Wall Street Journal called this release "among the most far- reaching steps that the Financial Accounting Standards Board has made in its thirty-year history. " As a result, companies must learn how to rigorously and efficiently value and expense employee stock options (ESOs). Based on author Johnathan Mun’s advisory work with the FASB over 2003 and 2004, his graduate research work in the area of options analysis, and actual FAS 123 consulting projects with several Fortune 500 firms, Valuing Employee Stock Options provides you with a comprehensive understanding of the valuation applications of a customized binomial lattice through a systematic and objective assessment of the methodology.

This just-in-time resource includes informative sections that:

· Review the impact of ESO Cost
· Illustrate the issues of fair market valuation through an analytical assessment of three mainstream approaches used in option pricing
· Discuss the technical background required to run the Black-Scholes model (BSM) and customized binomial lattices
· Run through in-depth sample case studies applying FAS 123
· Provide multiple options valuation results that prove valuable from the perspective of both an analyst and a chief financial officer

The analyses performed in this book also use the author’s own proprietary customized binomial lattice computer algorithms as well as his Real Options Analysis Toolkit, and Risk Simulator simulation software. Filled with in-depth insight and expert advice, Valuing Employee Stock Options can help CFOs and finance directors as well as analysts, consultants, and accountants understand the implications and applications of valuing employee stock options in light of today’s ever-changing financial rules and regulations.

"Veritas has modeled the valuation of its employee stock options for analytical purposes using a proprietary customized binomial lattice developed by Dr. Johnathan Mun. The valuation based on the customized binomial lattice model allows us to take into account the impacts of multiple vesting periods, employee suboptimal exercise behavior, forfeiture rates, changing risk-free rates, and changing volatilities over the life of the option. . . . The customized binomial lattice model resulted in a considerably lower expense, considering the expensing guidelines included in the FAS 123."

–Don Rath, Vice President, Tax and Stock Administration, Veritas Software Corporation

"This is one of those rare books written in anticipation of a major shift in the industry and economy. FAS 123 will throw a lot of public companies into a frenzy . . . the smart ones are identifying the opportunity to master the process and take over the driver’s seat. The methodology and the tools developed by Dr. Johnathan Mun are proven, pragmatic, and offer a great deal of value and benefit to those early adopters."

–Dr. Markus Junginger, Managing Partner, IBCOL Consulting

"After extensive review of the FASB exposure draft and consideration of a variety of option valuation methodologies, E*TRADE FINANCIAL has decided to implement a binomial lattice model in Equity Edge, our stock plan management and reporting software. We found Dr. Mun’s work on employee stock option pricing very valuable."

–Naveen Agarwal, Director, Product Management, E*TRADE FINANCIAL Corporation

Applied Risk Analysis: Moving Beyond Uncertainty, 1st Edition (Wiley, 2003)

Applied Risk Analysis by Dr. Johnathan Mun (Wiley 2003), includes a CD-ROM with a series of Excel worksheet models ranging from stochastic simulations to resource optimization. The book and software are being adopted by various universities around the world in their MBA programs. Leading industries are in the process of adopting the methodologies outlined in the book and software.

"Once again, Dr. Mun has created a ‘must-have, must-read’ book for anyone interested in the practical application of risk analysis. Other books speak in academic generalities, or focus on one area of risk application. Applied Risk Analysis gets to the heart of the matter with applications for every area of risk analysis. You have a real option to buy almost any book–you should exercise your option and get this one!"

–Glenn Kautt, MBA, CFP, EA, President and Chairman, Monitor Group, Inc.

"Johnathan Mun’s book is a sparkling jewel in my finance library. Mun demonstrates a deep understanding of the underlying mathematical theory in his ability to reduce complex concepts to lucid explanations and applications. For this reason, he’s my favorite writer in this field."

–Janet Tavakoli, President, Tavakoli Structured Finance, Inc. and author of Collateralized Debt
  Obligations & Structured Finance

"Every year the market of managerial books is flooded again and again. This book is different. It puts a valuable tool into the hands of corporate managers who are willing to stand up against uncertainties and risks and are determined to deliver value to shareholder and society, even in rough times. It is a book for the new generation of managers, for whom Corporate America is waiting."

–Dr. Markus Götz Junginger, Managing Partner, IBCOL Consulting AG (Switzerland)

"Dr. Mun breaks through the hyperbole and presents a clear step-by-step approach revealing to readers how quantitative methods and tools can truly make a difference. In short, he teaches you what's relevant and a ‘must know.’ I highly recommend this book, especially if you want to effectively incorporate the latest technologies into your decision making process for your real world business."

–Dr. Paul W. Finnegan, MD, MBA, Vice President, Commercial Operations and Development, Alexion Pharmaceuticals, Inc.

"A must read for product portfolio managers . . . it captures the risk exposure of strategic investments, and provides management with estimates of potential outcomes and options for risk mitigation."

–Rafael Gutierrez, Exec. Director of Strategic Marketing Planning, Seagate Technology

"Johnathan Mun has previously published a number of very popular books dealing with different aspects of risk analysis-associated techniques and tools. This last publication puts all the pieces together. The book is really unavoidable for any professional who wants to address risk evaluation following a logical, concrete and conclusive approach."

–Jean Louis Vaysse, Deputy Vice President Marketing, Airbus (France)

Real Options Analysis Course: Business Cases (Wiley, 2002)

In his groundbreaking book Real Options Analysis, real options expert Johnathan Mun provided a qualitative and quantitative description of real options, the methods used in solving them, why and when they are used, and the applicability of these methods in the decision-making process. Now, in his latest endeavor–Real Options Analysis Course–Mun sets out to help you truly optimize the use of real options in the decision-making process, through an in-depth discussion of real-world business cases and innovative real options software applications.

Real Options Analysis Course opens with a clear introduction on how to get started with the Real Options Analysis Toolkit (limited edition) included on the companion CD-ROM. Easy-to-follow directions allow you to set up and familiarize yourself with this cutting-edge software, which features seventy different real options functions, thirty-three models, easy-to-use templates, and a powerful graphical interface.

Once you’re up and running, Real Options Analysis Course lays the groundwork for the numerous business cases that will be explored later on in the book. First, you will become familiar with the seven simple stepwise procedures used in setting up and solving a real options problem. Then you’ll receive a refresher course on the basics of financial modeling–Monte Carlo simulation and volatility estimates–as well as the basics of real options, from binomial lattices to state-pricing approaches to solving a European option.

From here, you will receive an executive education on applying real options in a dynamic business environment–through examining some of the most comprehensive series of real options business cases, their inherent problems, and their solutions, which can be solved using the software included on the companion CD-ROM. Some of the cases you will work on include:

Option to Abandon
Option to Expand
Option to Contract
Option to Choose
Compound Options
Barrier Options
Basic Black-Scholes with Dividends
Stochastic Timing Options
Switching Options

Real Options Analysis Course provides a cutting-edge view of evaluating and valuing capital investment strategies by taking into consideration the inherent real options embedded in the strategic decision-making process. Combining expert advice and in-depth business cases with innovative real options analysis software, Real Options Analysis Course will help you identify, prioritize, value, and manage strategic opportunities better than ever before.

"Dr. Mun’s latest book is a logical extension of the theory and application presented in Real Options
Analysis. More specifically, the Real Options Analysis Course presents numerous real options examples and provides the reader with step-by-step problem-solving techniques. After having read the book, readers will better understand the underlying theory and the opportunities for applying real option theory in corporate decision-making."

–Chris D. Treharne, President, Gibraltar Business Appraisals, Inc.

"This text provides an excellent follow up to Dr. Mun’s first book, Real Options Analysis. The cases in Real Options Analysis Course provide numerous examples of how the use of real options and the Real Options Analysis Toolkit software can assist in the valuation of strategic and managerial flexibility in a variety of arenas."

–Charles T. Hardy, PhD, Chief Financial Officer & Director of Business Development, Panorama Research, Inc.

"Most of us come to real options from the perspective of our own areas of expertise. Mun’s great skill with this book is in making real options analysis understandable, relevant, and immediately applicable to the field within which you are working."

–Robert Fourt, Partner, Gerald Eve (UK)

"Mun provides a practical step-by-step guide to applying simulation and real options analysis–invaluable to those of us who are no longer satisfied with conventional valuation approaches alone."

–Fred Kohli, Head of Portfolio Management, Syngenta Crop Protection Ltd. (Switzerland)

Real Options Analysis: Tools and Techniques, 1st Edition (Wiley 2002)

Real Options Analysis by Dr. Johnathan Mun (Wiley 2002), provides you with a comprehensive overview of the real options methodology and explores the tools and techniques inherent in this method that will allow you to efficiently value strategic investments and decisions. It examines both the qualitative and quantitative aspects of real options, the methods used in valuing real options, why and when they are used, as well as the applicability of these methods in decision-making. Real options expert Johnathan Mun will help you understand and implement real options analysis under a variety of circumstances and over a wide range of industries, from pharmaceutical, oil, and gas to manufacturing and technology. Mun first looks at the qualitative nature of real options and provides actual business cases and scenarios of real options in the industry, as well as high-level explanations of how real options provide much-needed insights for decision-making. He then focuses on quantitative analysis, and reveals the power of simulation and real options analysis through the book’s companion CD-ROM.

From the basics of expansion and switching options to advanced options problems such as valuing timing options calculated with stochastic optimization, Real Options Analysis is a complete and accessible guide to the uses of real options in the decision-making process. Through expert advice, in-depth case studies, mathematical formulae, real-world scenarios, real options software, and end-of-chapter questions, Real Options Analysis provides serious insights into the understanding and application of real options when valuing strategic investments and decisions.

"This book is a must-have and must-read . . . Mun’s new book is a refreshing, cutting-edge look at a powerful new decision-making process . . . it isn’t often you can truthfully say a book breaks new ground, but [this book] has certainly done that."

–Glenn G. Kautt, President, Monitor Group, Inc. (USA)

"Many books on real options can be intimidating. Mun offers a pragmatic, reliable, and entertaining guide. Complex concepts and formulas are brilliantly interspersed with well-chosen examples and step-by-step walk-throughs from a variety of industries."

–Shota Hattori, President and CEO, Kozo Keikaku Engineering, Inc. (Japan)

"The clarity and comprehensive coverage makes it one of the best guides for all practitioners . . . coupled with state-of-the-art financial tools on CD-ROM."

–Michael Sim, Partner, Moores Rowland International (Hong Kong)

"Mun certainly has earned the reputation of being an expert on the subject . . . consultants, analysts, decision-makers and engineers will be all over this book and its software."

–Phyllis Koessler, Managing Director, Koessler and Associates (Switzerland)

"Finally, a real options analysis book that is technically sophisticated enough to be useful, and practically written so that it can actually be used. It is destined to become the handbook of real options."

–A. Tracy Gomes, President, Intellectual Property Economics, LLC (USA)