Real options and strategic decision analysis

Real options and strategic decision analysis

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Article ID: iaor20081622
Country: South Korea
Volume: 33
Issue: 2
Start Page Number: 221
End Page Number: 226
Publication Date: Jun 2007
Journal: Journal of the Korean Institute of Industrial Engineers
Authors: ,
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.

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