• The Korean Journal of Applied Statistics
• /
• v.21 no.3
• /
• pp.485-495
• /
• 2008

A floating-strike lookback call option gives the holder the right to buy at the lowest price of the underlying asset. Similarly, a floating-strike lookback put option gives the holder the right to sell at the highest price. This paper will present explicit pricing formulas for these floating-strike lookback options with flexible monitoring periods. The monitoring periods of these options start at an arbitrary date and end at another arbitrary date before maturity. Sections 3 and 4 assume that the underlying assets pay no dividends. In contrast, Section 5 will derive explicit pricing formulas for these options when their underlying asset pays dividends continuously at a rate proportional to its price.

• Journal of Information Technology Applications and Management
• /
• v.26 no.6
• /
• pp.119-138
• /
• 2019

This work examines whether IT managers adopt of real options such as defer, expand, contract, and abandon in order to cope with ERP risks, which include technological risk, relationship risk with SW vendors, economic risk, and security risk. We collect data of logistics firms in Seoul and its suburbs in 2018 to empirically validate the effect of risks upon the adoption of real options. The results suggest that IT managers adopt all 4 options when facing economic risk and adopt contract and abandon options only when facing security risk. Additionally, we find that IT managers prefers expand option and avoid abandon option when they think ERP compatibility is high.

• Journal of applied mathematics & informatics
• /
• v.38 no.5_6
• /
• pp.439-461
• /
• 2020

A step-up option is a newly developed financial instrument that simultaneously provides higher security and profitability. This paper introduces two step-up options: step-up type1 and step-up type2 options, and derives the option pricing formulas using the Laplace transform. We assume that the underlying equity price follows a regime-switching model that reflects the long-term maturity of these options. The option prices are calculated for the two types of funds, a pure stock fund composed of risky assets only and a mixed fund composed of stocks and bonds, to reflect possible variety in the fund underlying asset mix. The impact of changes in the model parameters on the option prices is analyzed. This paper provides information crucial to product developments.

• Journal of Information Technology Applications and Management
• /
• v.24 no.4
• /
• pp.117-131
• /
• 2017

We question whether Korean IT managers consider real options to reduce risks of cloud service implementation. This work investigates the impact of technology risk, relationship risk, economy risk, security risk upon the intention of IT managers to utilize abandon & expansion options. We also analyze moderation effect of centralization level of decision making between these risks and the utilization of real options. Using the survey questionnaire, we empirically find that technology risk, relationship risk and security risk have significant effect upon abandon option and technology risk, relationship risk, and economy upon expansion option. We also find the evidence that centralization level moderates some risks and the direction of moderation effect is to offset the effect of risks on intention to utilize real options.

• IE interfaces
• /
• v.18 no.2
• /
• pp.184-192
• /
• 2005

In recent research there has been intense interest in understanding how real option valuation (ROV) approaches might usefully complement conventional discounted cash flow (DCF) techniques. However, investment decision makers in a real world have been worried about adopting the ROV approaches mainly because of difficulty in technically understanding the theory of the ROV approaches as indicated by many researchers. With this difficulty in mind, we propose the opportunity cost model as another discrete-time model to value a deferral option. The main advantage of observing a real options value in terms of the opportunity cost concept is to provide a technique for practitioners to estimate a wide range of real options values without sticking to a financial option modelling. The fundamental ground for developing the opportunity cost model proposed in this paper lies in the work of dissecting the structure of the real options value into three categories: capital gain, expected opportunity loss, and expected opportunity gain. At the end of the paper, we will present a short illustrative example to demonstrate the applicability of the model.

• Proceedings of the Korea Technology Innovation Society Conference
• /
• 2002.05b
• /
• pp.181-198
• /
• 2002

This article describes a methodology for evaluating huge aerospace R&D investments using the real options pricing method. Option pricing has been proposed as a useful approach for modeling investment in R&D. Two important features of R&D investments are that an R&D project takes time to complete and that the outcome of R&D investments is highly uncertain. This makes the analysis of R&D investments difficult. Traditional tools for project evaluation, like IRR or the NPV, are inadequate for coping with the high uncertainty. Hence, In this article I propose a log-transformed binomal lattice method, and it will show that option pricing might be an adequate framework for evaluating such types of aerospace investments.

• Korean Journal of Organic Agriculture
• /
• v.28 no.4
• /
• pp.459-475
• /
• 2020

This study analyzes weather derivatives as an alternative risk management tool to stabilize farm revenue to complement the existing crop insurance program which suffers from asymmetric information problems such as adverse selection, moral hazard, and verifiability. We estimated apple yield functions to observe the relationship between yields and weather indices such as temperature and precipitation. Based on the estimated yield functions we designed weather futures and options products underlying temperature and precipitation, and calculated the prices of futures and options by two different approaches, historical distribution and Monte Carlo simulation. We found that weather futures and options stabilize farm revenue based on the estimated four risk indicators: Coefficient of Variation, Value at Risk, Certainty Equivalence, and Risk Premium. As a result, weather derivatives could be considered as a potential farm risk management tool through studying more in legal and institutional strategies and developing various derivatives products.

• Asian Journal of Business Environment
• /
• v.12 no.4
• /
• pp.13-24
• /
• 2022

Purpose: Motivated by an expedited growth and distribution of Online Food-Delivery (OFD) services, especially during the recent Covid-19 pandemic, this research aims to explore 1) how consumers' sustainability considerations are associated with satisfaction with the services via opt-out cutlery options and 2) the role of the pandemic in the relationships between sustainability considerations, attitudes toward opt-out cutlery options, and satisfaction with the OFD services. Data and Methodology: An analysis of survey data using 434 consumers in the United States recruited from Amazon M-Turk was conducted using structural equation modeling. Results: Findings suggest that consumers' environmental, health, and ethical considerations are positively related to their attitudes toward opt-out cutlery options. Furthermore, attitudes toward opt-out cutlery options are positively related to satisfaction with the OFD services only when they feel connected with the environment, driven by perceived threats of an infectious disease (i.e. Covid-19). Conclusion: The study findings provide new insights to managers in the OFD service industry on how to promote sustainable consumption during the pandemic.

• Journal of applied mathematics & informatics
• /
• v.41 no.1
• /
• pp.33-50
• /
• 2023

Foreign exchange options are derivative financial instruments that can exchange one currency for another at a prescribed exchange rate on a specified date. In this study, we examine the analytic formulas for vulnerable foreign exchange options based on multi-scale stochastic volatility driven by two diffusion processes: a fast mean-reverting process and a slow mean-reverting process. In particular, we take advantage of the asymptotic analysis and the technique of the Mellin transform on the partial differential equation (PDE) with respect to the option price, to derive approximated prices that are combined with a leading order price and two correction term prices. To verify the price accuracy of the approximated solutions, we utilize the Monte Carlo method. Furthermore, in the numerical experiments, we investigate the behaviors of the vulnerable foreign exchange options prices in terms of model parameters and the sensitivities of the stochastic volatility factors to the option price.

• Korean Journal of Mathematics
• /
• v.13 no.1
• /
• pp.19-34
• /
• 2005

Pricing and hedging strategy for European options of jump-type asset models, which are derived from a stochastic differential equations, are discussed.