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Real Options, Connecting Theory to Data: Modeling Actively Traded Philippine Universal Banks

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posted on 2019-03-11, 16:08 authored by Jackson TanJackson Tan, Fernando L. Trinidad
This case study discusses research aspects relating to a Real Options model that values the strategies to lend or to idle a loan portfolio in a chaotic system. Here, discussion focuses on associating events with changes in data, and advocates the basis of data interpretations upon practices and events in the real world. The study examined data from annual reports for actively traded Philippine Universal Banks during an eight-year window of observation, from 2008 to 2015. A Real Options model was developed and forwarded to examine the lending behavior of these formal lending institutions as affected by income inflows, contingent claims, time, volatility, growth rates, a discount rate, and information asymmetry. This study expressed that actively traded Philippine Universal Banks should create more micro lending and risk mitigation facilities to encourage a more inclusive banking system.


Declaration of conflicts of interest

There are no conflicts of interest.

Corresponding author email

Lead author country

  • Philippines

Lead author job role

  • Higher Education Lecturer

Lead author institution

University of Santo Tomas

Human subjects

  • No

Ethis statement

This study uses secondary data. Hence, since information is publicly available, there are no ethical conflicts.


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