Datar–Mathews method for real option valuation

The Datar–Mathews method (DM method) is a method for real options valuation. The method provides an easy way to determine the real option value of a project simply by using the average of positive outcomes for the project. The method can be understood as an extension of the net present value (NPV) multi-scenario Monte Carlo model with an adjustment for risk aversion and economic decision-making. The method uses information that arises naturally in a standard discounted cash flow (DCF), or NPV, project financial valuation. It was created in 2000 by Professor Vinay Datar, Seattle University, and Scott H. Mathews, Technical Fellow, The Boeing Company.