Researcher ORCID Identifier


Graduation Year


Date of Submission


Document Type

Open Access Senior Thesis

Degree Name

Bachelor of Arts



Reader 1

Ricardo Fernholz

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This paper examines the evaluation of investment opportunities in emerging markets (EMs) through real options analysis, against the backdrop of their unique risk profiles and the recent trend of EMs exhibiting resilience in economic performance. While EMs are associated with high growth rates and infrastructure gaps, they have shown adaptability, particularly in monetary policy responses to inflation. This paper explores the sensitivity of net present value (NPV) and real options (RO) to changes in the capital asset pricing model, adapting the yield spread to capture default risk and local risk-free rates. Utilizing oil benchmark price data, the paper constructs a stylized five-year oil refinery project and evaluates nineteen countries using the Salomon Smith Barney (SSB) method for an adjusted NPV, a non-adjusted true NPV, and a heuristic unadjusted NPV. A binomial lattice model calculates option values at each stage, suggesting strategic investment deferrals when warranted. The findings underscore the inadequacy of unadjusted NPV as an estimator and the efficacy of the SSB model, with real options analysis providing a robust framework for firms to navigate complexities and seize opportunities in EMs.