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Real Options and Strategic Decision Analysis  

Kim, Ki-Hong (Department of Industrial Engineering, Seoul National University)
Oh, Hyung-Sik (Department of Industrial Engineering, Seoul National University)
Publication Information
Journal of Korean Institute of Industrial Engineers / v.33, no.2, 2007 , pp. 221-226 More about this Journal
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
Strategic Decision Analysis; Real Options; Investment Lag; Risk-neutral Pricing;
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