[KSCI] Korea Science Citation Index Service

http://dx.doi.org/10.7545/ajip.2016.5.2.197

Using Real Options Pricing to Value Public R&D Investment in the Deep Seabed Manganese Nodule Project

Choi, Hyo-Yeon (Research Center for Water Policy and Economy, K-water Institute)
Kwak, Seung-Jun (Department of Economics, Korea University)
Yoo, Seung-Hoon (Department of Energy Policy, Graduate School of Energy & Environment, Seoul National University of Science & Technology)

Publication Information

Asian Journal of Innovation and Policy / v.5, no.2, 2016 , pp. 197-207 More about this Journal

Abstract

This paper seeks to measure the monetary value of technical development in the deep seabed manganese nodule mining by applying the compound option model (COM). The COM is appropriate for the project in terms of its decision-making structure and embedded uncertainty. The estimation results show that the deep seabed mining project has more economic potential than shown by the previously obtained results from the discounted cash flow (DCF) analysis. In addition, it is reasonable to invest in the project taking the various uncertainty factors into consideration, because the ratio of the value to the cost of the project is far higher than one. This information can be utilized in national ocean policy decision-making.

Keywords

Real option pricing; compound option model; technology valuation; deep seabed manganese nodule project;

Citations & Related Records

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