Journal of Korean Institute of Industrial Engineers (대한산업공학회지)

Korean Institute of Industrial Engineers (대한산업공학회)
권호 표지

Real Options and Strategic Decision Analysis

실물 옵션과 전략적 의사 결정

  • Kim, Ki-Hong (Department of Industrial Engineering, Seoul National University) ;
  • Oh, Hyung-Sik (Department of Industrial Engineering, Seoul National University)
  • 김기홍 (서울대학교 산업공학과) ;
  • 오형식 (서울대학교 산업공학과)
  • Published : 2007.06.30
Download PDF
⟨ Previous Next ⟩

Abstract

This paper suggests a valuation framework of investment project using the concept of real options. We show the valuation process of real assets using the risk-neutral pricing. Especially, we focus on the investment lag. Real assets have investment lag in general. The decision time and the payment time are not identical. So the investment lag should be considered when valuing real assets for reality. We provide the valuation process for real assets, including R&D project. The results of this paper can be used for the real assets valuation and strategic decision analysis.

Keywords

References

  1. Alvarez, Luis, H. R. and Jussi, Keppo (2002), The Impact of Delivery Lags on Irreversible Investment under Uncertainty. European Journal of Operational Research 136(1), 173-180 https://doi.org/10.1016/S0377-2217(01)00057-1
  2. Bar-llan, Avner and William, C. Strange (1996), Investment Lags, The American Economic Review, 86, 610-622
  3. Brennan, Michael J. and Eduardo, S. Schwartz (1985), Evaluating Natural Resources Investment, The Journal of Business, 58(2), 135-157 https://doi.org/10.1086/296288
  4. Dixit, Avinash K. and Robert, S. Pindyck (1994), Investment under Uncertainty, Princeton University Press
  5. Hull, John C. (2003), Options, Futures, and Other Derivatives, 5th ed. Prentice Hall
  6. MacDougall, Shelley L. and Richard, H. Pike (2003), Consider Your Options: Changes to Strategic Value During Implementation of Advanced Manufacturing Technology, Omega, 31(1), 1-15 https://doi.org/10.1016/S0305-0483(02)00061-0
  7. Majd, Saman and Robert, S. Pindyck (1987), Time to Build, Option Value, and Investment Decision, Journal of Financial Economics, 18(1), 7-27 https://doi.org/10.1016/0304-405X(87)90059-6
  8. Margrabe, William (1978), The Value of an Option to Exchange One Asset for Another, The Journal of Finance, 33(1), 177-186 https://doi.org/10.2307/2326358
  9. McDonald, Robert and Daniel Siegel (1986), The Value of Waiting to Invest, The Quarterly Journal of Economics, 101(4),707-728 https://doi.org/10.2307/1884175
  10. Panayi, Sylvia and Lenos, Trigeorgis (1998), Multi-stage Real Options: The Case of Information Technology Infrastructure and International Bank Expansion, The Quarterly Review of Economics and Finance, 38(3), 675-692 https://doi.org/10.1016/S1062-9769(99)80096-9
  11. Titman, Sheridan (1985), Urban Land Prices under Uncertainty, The American Economic Review, 75(3), 505-514