Valuing Flexibility in Ship Design - A Real Options Approach
MetadataShow full item record
- Institutt for marin teknikk 
This thesis is a Real Options (RO) approach to valuing flexibility in ship design. The overall object is to find the value of owning a Multipurpose Offshore Construction Vessel (MOCV) by applying the Black-Scholes Option Pricing Model. The MOCV holds the option of switching into an Offshore Subsea Construction Vessel (OSCV), a Well Intervention Vessel or a Pipe Laying Vessel. The thesis aims to discuss the owner s economic benefit of owning an MOCV instead of three separate single purpose vessels. Dimensions, equipment types and capacities on the MOCV are based on the reference vessel, The Island Performer. To solve this task, the problem has been limited by the following boundaries: at the time T=0, the vessel will be completed as an OSCV with options for further evolvement. At the end of each contract the owner has the option to switch to a different market by switching vessel type. Each of the three markets have different contract lengths and the analysis only considers the first four contracts of the vessel s service time. In the RO Analysis, the time to maturity of the option is considered equal to the remaining time of the current contract. The stock prices and the stock price volatility are estimated based on the vessel s daily hire rates under long-term contracts in the North Sea. The strike price is equal to the cost of switching vessel types and each switching option has a different strike price. Lastly, ten-year government bonds underlie the risk- free rate. The main results from this analysis confirm that a vessel that can work as a working platform for different vessel types is a good investment in an uncertain market. From the results it can be seen that the value of owning a MOCV is strictly positive in all three cases. The values even exceed the initial investment. It has also been demonstrated that the maximum amount one can save by storing the deck equipment for future periods is 25 mUSD. Due to different assumptions made the for vessel types, it is difficult to comment on whether one of the vessel types is more preferred than the other two.