For students

I supervise project and master theses, and I am also looking for potential PhD students. The theses can be shaped with varying difficulty and degree of theory. A lot of the theses can provide a solid foundation for a future PhD. More details can be found below regarding suggestions and previous thesis topics. If there is more you would like to know, do not hesitate to contact me at the link below.

 

Master thesis suggestions

Real Options and Learning –Application to Investment Decisions in Renewables Energy Project under Policy Uncertainty
In this project, students will examine how the potential to learn about extensions, revisions or termination of government policies can affect investment behavior. We will apply a real options approach to model the investment decision of investors under uncertainty. In order to include the aspect of learning, students will first review the current literature for suitable modelling approaches and then propose an extension of current real options models to account for the aspect of learning. In a further step, students will be able to discuss these issues with an industry partner. This topic is part of the ongoing knowledge building project with industry InvestExL (InvestExL project website).

Previous Master Theses sorted by topic

Renewable energy & Electricity markets

Real Options Approach to Analyse the Attractiveness of Different Grid Solutions for Offshore Wind Projects – A Case Study from Norway
Ane Bakken Hodt & June Bakken Hodt, Spring 2022
As a step towards climate neutrality and the establishment of a new green industry in Norway, the Norwegian government has recently revealed plans to make large-scale offshore wind development on the Norwegian continental shelf a reality. From the perspective of an offshore wind developer, this paper aims to analyse the economic attractiveness of three offshore grid solutions for offshore wind projects: a radial connection and hybrid grids between two and three power markets, under different market conditions. We apply a real options approach implemented through a least squares Monte Carlo algorithm to account for uncertainty in electricity prices and managerial flexibility. Two support schemes for hybrid projects are examined: reallocation of a share of congestion income and a Transmission Access Guarantee (TAG). In addition, the impact of regulatory uncertainty in terms of unpredictable future grid solutions on developers’ investment incentives is studied. Read more…

Norway’s Ambitious Climate Targets – A Threat to the Development of Floating Offshore Wind?
Daniel Aghajani & Vincent Kyrre Gerard Toutain, Spring 2021
Rising concerns about climate change compel nations to adopt ambitious and transformative climate targets. Accordingly, the Norwegian government has advocated for the vast oceanic wind resources available on the Norwegian continental shelf (NCS) to play an important role in decarbonizing its oil and gas industry. To realize this endeavor, floating offshore wind technology is required as the NCS primarily consists of deep waters. With comprehensive experience and knowledge of offshore operations from the petroleum sector, Norway is uniquely positioned to kick-start the national offshore wind industry through decarbonizing oil and gas platforms on the NCS.  Read more…

Power purchase agreement vs. investment in power generation: Analysing the trade-offs for a large industrial power consumer considering wind power in the Norwegian market
Mathilde Knobel Christensen, Kari Renslo Instefjord & Trine Marie Tonhaugen, Spring 2019
In recent years, there are two major developments in Norwegian wind power emerging. Firstly, wind power projects are about to become profitable without government support. Secondly, power purchase agreements (PPA) related to wind power arise in the market. Many of the largest wind power projects in Norway have been realized because of funding from international investors, who require a PPA to enter a project. In this thesis we examine the two market tendencies, taking the perspective of a large power consumer situated in Norway. We will investigate whether to develop and operate an onshore wind power plant, or entering a wind power PPA, is a more beneficial position to cover the power demand of the consumer. Read more…

Real Options Valuation of Wind Energy Investments in Norway and Sweden: A Case Study
Fredrik Finjord & Marius Tangen, Spring 2017; A revised version of this thesis was published in Energy Policy Link
We use the real options approach to examine the investment opportunity of a private investor, both from a Norwegian and Swedish perspective, that holds an option to invest in a renewable energy project. Norway and Sweden have implemented a common green certificate subsidy scheme, where the regulations differ between the countries. We evaluate the option values and optimal investment behaviour using a wind energy case study, and analyze how investments are affected by uncertain prices and the regulatory differences. Read more…

Green Investment under Policy Uncertainty and Bayesian Learning
Peder Andreas Olsen Dalby, Gisle Ryan Gillerhaugen and Tord Leth-Olsen, Spring 2016; A revised version of this thesis was published in Energy Link
The main purpose of this paper is to examine how investment behavior is affected by updating a subjective belief on the timing of a subsidy revision. We incorporate Bayesian learning into a real options modeling approach. Subsidies in the form of fixed feed-in tariffs (FIT) are considered, and we analyze a scenario where a retroactive downward adjustment of the FIT is expected through a regime switching model. We find that investors are less likely to invest when the arrival rate of a policy change increases. Further, investors prefer a lower FIT with a long expected lifespan, while policy makers prefer a higher FIT with shorter life span. Read more…

Optimal investment in hydrogen production from wind power under uncertainty: A Norwegian case study
Adil Rashid, Fall 2016

Investment in flexible hydrogen production from local wind power: Optimising timing, capacity and plant operations of an investment under uncertainty
Jørgen Bjørnstad Engh and Lars Michael Eeg Ødegaard, Spring 2016
In this thesis we consider a price taking Norwegian energy producer who considers to become a supplier of hydrogen in the future. The company holds the option to invest in hydrogen production from electrolysis by extending an existing wind farm. The hydrogen production is assumed to be flexible, and the investor needs to decide how to operate the hydrogen plant optimally to maximise his profits. In order to find optimal timing, capacity and plant operation of the investment under uncertainty, we apply a real options approach. We develop a multi-factor model using dynamic programming that is solved using least square Monte Carlo. Read more…

Optimal Investment and Replacement Timing for small Wind Power Projects utilizing second-hand Wind Turbines
Ulrik Dale Mannhart, Spring 2016

Transmission and Power Generation Investment under Uncertainty
Nora Sune Midttun and Jannicke Soløy Sletten, Spring 2015
We study a market consisting of a welfare-maximising TSO and a profit-maximising power company. The TSO holds an option to invest in a new transmission line, while the power company has installed some generation capacity but holds an option to expand. The proposed model captures both the investment strategies of the TSO and the power company and accounts for the conflicting objectives and game-theoretic interactions of the distinct agents. Taking a real options approach allows us to study the effect of uncertainty on the investment strategies and take into account timing as well as sizing flexibility. Read more…

Portfolio Optimization of Wind Power Projects
Silje Johannessen, Spring 2015
In this thesis a real options approach to capital budgeting decisions in wind power is analyzed, and the method’s suitability is evaluated in relation to a traditional discounted cash flow approach. The hypothesis is that the real options approach will improve the quality of the information in the decision making process, and optimize the project selection for wind power portfolios. The model developed in this thesis is applied to TrønderEnergi’s investment portfolio. Read more…

Investment in Electric Energy Storage Under Uncertainty: A Real Options Approach
Ida Bakke and Beate Norheim, Spring 2015; A revised version of this thesis was published in Computational Management Science Link
his thesis analyzes the profitability of investing in a battery bank in Germany and the UK, using a real options model. The model determines the option value and the optimal investment time, under the conditions of uncertain revenues and investment cost. The results show that it is profitable to invest in both countries, given that the battery banks can participate in both the spot and balancing market. The valuation also gives insight into how the battery bank should be operated between the two markets to maximize its expected profits and discovers that the battery earns over 70 % of its profit from ancillary services. Read more…

A Comparison of Selected Real Options Valuation Approaches to the Net Present Value Method for an Investment Opportunity in Onshore Wind
Caroline Heggelund and Ida O’Sullivan Myran, Spring 2014
In this thesis we demonstrate the difference between some selected valuation methods, and discuss their suitability for valuing an investment opportunity in a wind power project. The focus is on real options analysis, and our hypothesis is that the use of real options valuation methods will improve the quality of the information available for decision makers, ultimately improving the quality of investment decisions in wind power. The specific wind power project that we value is owned by TrønderEnergi AS, a renewable energy company based in Sør-Trønderlag county in Norway. Read more…

Oil & gas industry 

Development of a portfolio of marginal fields under reservoir and price uncertainty: A compound real options approach with Bayesian learning 
Tobias Hyldmo & Markus H. Skudal, Spring 2023
This thesis presents a compound real options analysis (CROA) that evaluates a portfolio of two marginal fields under reservoir- and oil price uncertainty. It allows us to identify the additional value from managerial flexibility when investing in tiebacks to an existing host. Based on updates of crude spot prices and sizes of the reservoirs, we apply a least-squares Monte Carlo algorithm (LSM) to evaluate whether to exercise the option to invest in either field or wait and reevaluate in consecutive years. A decision-maker has to choose which field should be tied back first while knowing there is an option to develop the other field afterward. Read more..

Evaluation of Tieback Developments for Marginal Oil Fields with Timing Flexibility 
Anders Rønning, Johannes H. Haugsgjerd & Richard W. H. Rogstad, Spring 2022; A revised version of this thesis was published in in Energy Economics Link
The average size of new oil discoveries on the Norwegian Continental Shelf (NCS) is steadily decreasing, which increases the risks associated with investment decisions in the Exploration and Production (E&P) of petroleum fields. Therefore, marginal fields risk remaining unexploited, thereby losing value for the Norwegian society. As standalone developments are often not economically viable for such fields, tiebacks to existing production facilities are usually considered. Read more…

Applying an integrated real options approach to oil field development: Valuing new information through appraisal under market and reservoir risk
Inti J. Castro & Partik Singh, Spring 2019
This thesis studies the investment problem of an oil company that faces the question of whether and when to invest in development of an oil field and, whether to invest in appraisal and how to determine optimal production. For years, the traditional discounted cash flow (DCF) method has been the predominant approach used by firms and investors to make capital budgeting decisions. However, the approach fails to exploit the managerial flexibilities inherent in field development projects. Read more…

Applying Real Options Valuation in the Concept Selection Phase of Petroleum Projects
Andrea Stephansen and Stine Cecilie Stangeland Sæle, Spring 2016

Investment under two sources of uncertainty – strategic decisions in offshore petroleum production
Inês Bento Gonçalves Pratas Leitão, Spring 2014

Aquaculture

Biodiversity impact assessment of the aquaculture industry in Norway – a company level application 
Markus B. Jansen & Gaute Nepstad, Spring 2022; A revised version of this thesis was published in Marine Policy Link
This thesis investigates the biodiversity impact of aquaculture companies in Norway. By utilizing publicly available data from 2016 to 2021 on the biodiversity impact variables sea lice, escapes, diseases, bottom conditions and lice treatments from the 36 largest salmon farming companies in Norway, we find which companies that have the best and worst impact on biodiversity and the different impact variables during that period. We apply an unsupervised clustering approach to classify the companies based on their biodiversity impact performance before aggregating the number of times a company ends up in each cluster to rank and compare the companies against each other. Read more…

Optimal Investment Strategy in Lice-Fighting Technologies
Oscar Mathias Brakstad & Dunja Matanovic, Spring 2017; A revised version of this thesis was published in Aquaculture Link
In this thesis we use a real options approach to solve an investment problem of an aquaculture firm. The model solves a two-fold problem. First, we find the optimal adoption timing of a future, permanent lice-fighting technology, given that such a technology can only be adopted once. Second, we find the optimal investment amount in temporary, lice-fighting solutions. Read more…

Optimal Investment Strategies in Offshore Salmon Farming using Real Options Valuation Methods: A case study of SalMar ASA’s investment in the Ocean Farming Facility
Jacob Aamodt, Peder Heien Langaard & Magnus Witzøe, Spring 2017

Real options valuation under technological uncertainty: A case study of Investment in a post-smolt facility
Jørgen Hannevik, Magnus Naustdal and Henrik Struksnæs, Spring 2015
In this thesis we examine if multi-factor real options analysis can uncover excess value compared to traditional DCF analysis by evaluating an investment in post-smolt production. Using dynamic programming we develop two multi-factor models enabling us to isolate and analyse the effects of two forms of technological uncertainty combined with profit uncertainty. Technological uncertainty is modelled as the arrival of an innovation that either reduces investment cost or increases production efficiency. Read more…

Smoother harvest of farmed salmon, value-adding or costly? Investigating the consequences for the different players in the industry
Anja Graff Nesse and Frida Næss-Ulseth, Spring 2014
In this master thesis a mathematical model for optimal harvest time of salmon given different harvest strategies is developed. The most important characteristic of the model is that it enables distribution of harvest over certain months in order to investigate the difference in profits between a non-smooth harvest profile and a smooth harvest profile. Read more…

Real Options Theory

Optimal Investment in Research and Development: A Real Option Approach
Glenn-Endre Østensen, Spring 2019
This paper looks at the optimal investment level in research and development for a firm that holds an option to make a technology switch. The paper models the investment in R&D by affecting the jump size in a Poisson jump process. We investigate both a deterministic and stochastic jump size. The paper conducts a sensitivity analysis that finds that for the optimum to be well defined there has to be a diminishing return on investment in R&D. Read more…

Optimal Investment Strategies under Decision-Dependent Stochastic Environments
Tord Olsen, Spring 2018
This thesis investigates the optimal investment decisions of a firm, when the characteristics of the firm’s stochastic environment are dependent on these decisions. We model situations where the market the firm operates in responds to the investment conducted by the firm, and therewith affects the characteristics of the firm’s stochastic profit flow. Read more…

Product Upgrading Decisions under Uncertainty in a Durable Goods Market
Steinar Bækkedal & Simen Ingebrigtsen, Spring 2017
This paper studies investment behavior of firms deciding when to introduce an upgrade in a durable goods market. The firm chooses both the investment timing and the price of the upgrade while facing the risk of the upgrade experiencing a serious malfunction and requiring a complete recall. The firm can reduce this risk by performing product tests of uncertain duration. We show that the willingness to introduce an upgrade early with significant malfunction risk is larger when (i) the demand for the existing version has weakened, (ii) the quality and stock of potential customers for the upgrade is high or (iii) the testing process is slow. Read more…

Other application areas

Evaluating Lead Time Decisions: A Case Study within the General Automotive Industry
Martin P. Fredriksen, Bjørn Erik G. Heiberg and Jørgen T. Moltu, Spring 2014
This Master’s Thesis presents a case study within the automotive industry to show the effects of exposure to demand risk when assessing different sourcing alternatives. Extending the existing geometric Brownian motion and mean reverting process, a discrete ARMA model is incorporated allowing for more flexibility in connecting demand to demand risk. Kongsberg Automotive’s plant in Hvittingfoss, Norway (KA), and their clutch servo produced for Scania is analyzed. Read more…

Other topic areas

Assessing the effect of potential tax regimes on investment incentives in future marine minerals projects on the Norwegian continental shelf form a corporate and a regulatory perspective – a dynamic programming approach based on simulation
Ådne Jonsbråten & Filip F. Minge, Spring 2023
In order to create insight important to the ongoing process of opening the NCS for mineral activity, we study how potential tax regimes would impact commercial interest. For this purpose we develop a methodology to assess the economic potential of a project of mining seafloor massive sulphides (SMS) deposits on the NCS, taking into consideration potential tax regimes that may apply to the Norwegian deep-sea mining industry. We take the perspective of a private operator company seeking to mine the NCS. We construct a valuation framework that accounts for multiple decision stages in the exploration process, as well as the decision whether to eventually mine the remaining prospects of interest by taking a dynamic programming approach based on simulations. Read more…

Applying a Monte Carlo approach to economically assess a deep sea mining project on the Norwegian continental shelf
Oscar A. Andreassen & Felix R. Borge, Spring 2022

Valuation and Risk Management of Paid-up Policies
Bjarte Knutsen Espedokken & Erlend Gjerdevik Sørtveit, Spring 2019
We derive the market value of paid-up policies given different investment and buffer strategies using a combination of the Black-Scholes and Hull-White One Factor Model. In addition, we analyze the impact of these strategies on both the risk and capital requirements under Solvency II. Finally, we analyze how the insurer can manage the risks using a separate hedge portfolio. Our results give valuable insight in the management of paid-up policies. Read more…