Interval-Valued Credibilistic Real Options Modeling Under Optimism-Pessimism Level

Jani Kinnunen*, Irina Georgescu

*Corresponding author for this work

    Research output: Chapter in Book/Conference proceedingConference contributionScientificpeer-review

    1 Citation (Scopus)


    Fuzzy real options analysis has advanced greatly during the last decade, specifically, through the development of so-called fuzzy pay-off techniques. The practicality and intuitiveness of these methods allow their straightforward integration into any spreadsheet or other evaluation systems for easy applications of real options thinking to real investments and strategies in industry and to public policy. Real options valuation models are capable to reflect the value of flexibility, i.e., the inherent optional possible actions, which managers can take during the investment period or in public policy settings. Traditional NPV methods cannot value such optionalities. Fuzzy modeling is shown to account for high uncertainty and imprecision under which an expert evaluation is conducted. This paper generalizes the credibilistic pay-off method for real options valuation using interval-valued fuzzy numbers, IVFNs, by means of mλ -measure for the optimism–pessimism level of an expert analyst. The mλ -measure is defined using necessity and possibility measures to correspond to the optimism–pessimism level. Real options values, ROVs, will be obtained using the λ-parameter and fuzzy numbers. Similarly, ROVs are obtained using IVFNs. This paper introduces a novel credibilistic real options model, which is based on the optimism–pessimism measure and IVFNs. The model outcomes are compared to the original credibilistic real options model through a numerical case example in a merger and acquisition context.

    Original languageEnglish
    Title of host publicationProceedings of International Conference on Data Science and Applications
    Subtitle of host publicationICDSA 2021, Volume 1
    EditorsMukesh Saraswat, Sarbani Roy, Chandreyee Chowdhury, Amir H. Gandomi
    PublisherSpringer Science and Business Media Deutschland GmbH
    Number of pages12
    ISBN (Electronic)978-981-16-5120-5
    ISBN (Print)978-981-16-5119-9
    Publication statusPublished - 2022
    MoE publication typeA4 Article in a conference publication
    Event2nd International Conference on Data Science and Applications, ICDSA 2021 - Virtual, Online
    Duration: 10 Apr 202111 Apr 2021

    Publication series

    NameLecture Notes in Networks and Systems
    ISSN (Print)2367-3370
    ISSN (Electronic)2367-3389


    Conference2nd International Conference on Data Science and Applications, ICDSA 2021
    CityVirtual, Online


    • Credibility theory
    • Fuzzy real options
    • Interval-valued fuzzy numbers
    • Mergers and acquisitions
    • Optimism-pessimism measure


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