• Journal of the Korea Academia-Industrial cooperation Society
• /
• v.17 no.12
• /
• pp.226-231
• /
• 2016

Binomial trees are used to price barrier options. Since barrier options are path dependent, option values of each node are calculated from binomial trees using backward induction. We use generalized Catalan numbers to determine the number of cases not reaching a barrier. We will generalize Catalan numbers by imposing upper and lower bounds. Reaching a barrier in binomial trees is determined by the difference between the number of up states and down states. If we count the cases that the differences between the up states and down states remain in a specific range, the probability of not reaching a barrier is obtained at a final node of the tree. With probabilities and option values at the final nodes of the tree, option prices are computable by discounting the expected option value at expiry. Without calculating option values in the middle nodes of binomial trees, option prices are computable only with final option values. We can obtain a probability distribution of exercising an option at expiry. Generalized Catalan numbers are expected to be applicable in many other areas.

• Proceedings of the Korean Operations and Management Science Society Conference
• /
• 2000.04a
• /
• pp.314-317
• /
• 2000

금융파생상품인 옵션의 가치평가를 이해하는 데 널리 사용되는 이항분포모형은 다음과 같은 특징을 가지는 것으로 알려져 있다 첫째, 옵션의 가치는 주가의 상승 또는 하락할 확률과는 무관하게 결정된다. 둘째, 옵션의 가치는 투자자의 위험에 대한 태도와는 관계없이 결정된다. 이 논문에서는 옵션의 기초물인 주가가 한기간 후에 상승 또는 하락하는 기본모형에서 옵션의 가치평가가 주가의 변동 확률과 투자자의 위험에 대한 태도와 무관하지 않음을 예제를 통하여 밝히게 될 것이다.

• Korean Journal of Construction Engineering and Management
• /
• v.15 no.1
• /
• pp.111-121
• /
• 2014

The Clean Development Mechanism (CDM) allows New & Renewable Energy projects to make additional income by selling CER's, which represent the amount of Green House Gases(GHG) that is reduced in the project. However, forward contracts used to hedge fluctuating market prices does not allow projects to sell CER's at a premium. As an alternate approach to maximize CER revenue, CER's are modeled as a 'real option', in which CER's are sold only above the desired sales price. Using the Binomial Option Pricing model, the resultant lattices are used to determine whether to sell, defer or abandon the option at individual nodes. Overlaying Pascal's Triangle on the lattices also enabled the calculation of the annual probabilities for deferring CER sales without incurring downside losses. Application to an actual Landfill Gas project showed increased overall NPV, and that CER sales could be deferred at a maximum of 2 years. The proposed framework allows transparency in the analysis and provides valuable and strategical information when making investment decisions related to CER sales of CDM projects.

• Proceedings of the Korean Institute Of Construction Engineering and Management
• /
• 2008.11a
• /
• pp.606-609
• /
• 2008

Traditionally, the feasibility of the private investment is determined by NPV(Net Presented Value) based on DCF(Discounted Cash Flow) and the volume of government's subsidiary without quantifying the effect of overturn share ratio and MRG(Minimum Revenue Guarantee), these variables which can seriously effect on the economic feasibility. One of the most important reasons why these variables are not underestimated is that the quantifying methods are insufficiently or so complicatedly studied to apply practically the real project. Therefore, this study suggests the modified binominal option model to estimate the overturn share ratio and MRG and estimates how much these variables impact the private investment. Also, these results are helpful to estimate how much the government's subsidiary can be reduced.

• Journal of Korea Port Economic Association
• /
• v.38 no.2
• /
• pp.95-107
• /
• 2022

Shipping companies earn profits through cargo transportation, and therefore, investment decisions to purchase ships are more important than anything else. Nevertheless, the cash flow discount method was mainly used in the economic analysis method, which assumes that all situations are static. This study shows that the real option model is useful in the economic analysis of ship investment. This economic analysis took into account the irreversibility of investment and uncertainty of benefits. In particular, this study used a binary option price determination model among real options. In addition, the simulation was conducted using actual investment data of A shipping company. As a result of the analysis, the investment value of used ships according to the net present value method was analyzed as negative (-), but the investment value in the real option model reflecting the flexibility of decision-making was evaluated as having positive (+) economic feasibility. It was analyzed that economic feasibility is affected by profit volatility and discount rate. Therefore, this study is expected to help shipping companies make more flexible decisions by using the real option model along with the existing net present value method when making ship investment decisions.

• Korean Journal of Construction Engineering and Management
• /
• v.17 no.1
• /
• pp.76-82
• /
• 2016

Decision-making in construction projects often include options features. Such embedded options are difficult to value properly and many decision makers do not have experience in option analysis. The purpose of this paper is to demonstrate how real option analysis can be used to value capital expenditures on construction materials. We propose a real option framework to evaluate decision-making processes involving the purchase of construction materials. A case study was conducted by evaluating the purchase decision-making of solar cells, a good with high price volatility. Using real option analysis two strategies to improve the financial feasibility of installing a solar panel system were derived. The first strategy involves using a price cap that gives the project manager the right, but not obligation, to buy the modules for a predefined price during the next year. The second strategy is to defer the purchase of the solar cells until future price information becomes clearer. Both of the strategies in the case study were valued using the binominal model. This study will help to improve the financial feasibility of purchasing construction materials with high price volatility by including the value of managerial flexibility.

• 한국IT서비스학회:학술대회논문집
• /
• 2008.11a
• /
• pp.108-111
• /
• 2008

최근 급격한 증가세를 보이고 있는 신재생에너지 사업중의 하나인 태양광 발전사업은 아직까지는 기술적, 사회적으로 초기 발전단계를 지나고 있다. 또한 원자재를 포함한 글로벌 실물경제의 변동성이 심하고 에너지 산업분야의 기술수준 역시 급변하고 있으며, 에너지 산업이 과거와 달리 자유경쟁 체제로 변화하고 있어서 태양광 발전사업의 가치를 평가하여 사업에 진입하고자 하는 의사결정을 갈수록 어렵게 하고 있다. 본 논문에서는 실물옵션 기반의 투자가치 평가방법을 적용하여 태양광 발전사업의 사업 투자가치와 최적투자시점을 분석한다. 전력판매가격과 초기투자비용 등의 불확실성에 대해 사업자가 대응 가능하도록 이항격자 모형을 통한 분석을 시도하고, 기존의 현금흐름할인법을 기반으로 한 사업성분석 결과와 비교하였다.

• Journal of the Korea Academia-Industrial cooperation Society
• /
• v.14 no.11
• /
• pp.5465-5475
• /
• 2013

In this study, when to invest in real estate abroad, to present a real option in the way of decision-making. Thus, by using the binomial option model of one of the real thing and DCF, we compared the choice of real estate investment in China and South Korea. Research concerns the real estate market of Shanghai and Seoul, Analyzed the data between 2001-2009. Results were calculated NPV investment period (Net Present Value), Seoul appears in 435.44, Shanghai was 398.26. Investment decision by NPV method will select Seoul. However, as a result of calculating the value using the real option, it was found that for Seoul appear in 615.4, Shanghai has been shown to 626.1, and is suitable for investment in Shanghai. Assuming on the basis of this, that it has invested in practice, and compare the results, Seoul is intended for since 2010, real estate prices fell to 2013 currently, damage has occurred, profit's occurred Shanghai. This ensures that when making decisions in real estate investment and to use the real option than the existing DCF is appropriate.

• Journal of the Korean Data and Information Science Society
• /
• v.24 no.4
• /
• pp.723-736
• /
• 2013

The importance of lapse rate is highly increasing due to the introduction of Cash Flow Pricing system, non-refund-of-reserve insurance policy, and IFRS (International Financial Reporting System) to the Korean insurance market. Researches on lapse rate have mainly focused on simple data analysis and regression analysis, etc. However, lapse rate can be analyzed by survival analysis and can be well explained in terms of several covariates with Cox proportional hazard model. Guaranteed minimum benefits embedded in variable annuities require more elegant statistical analysis of lapse rate. Hence, this paper analyzes data of policyholders with variable annuities by using Cox proportional hazard model. The key variables of policy holder that influences the lapse rate are payment method, premium, lapse insured to term insured, reserve-GMXB ratio, and age.