Title
Compound real option valuation with phase-specific volatility : a multi-phase mobile payments case study Compound real option valuation with phase-specific volatility : a multi-phase mobile payments case study
Author
Faculty/Department
Institute of Development Policy and Management
Publication type
article
Publication
Calcutta ,
Subject
Economics
Source (journal)
Technovation / Union Carbide. Chemicals Division. - Calcutta
Volume/pages
31(2011) :5-6 , p. 240-255
ISSN
0166-4972
ISI
000290425800005
Carrier
E
Target language
English (eng)
Full text (Publishers DOI)
Affiliation
University of Antwerp
Abstract
Multi-staged R&D projects are copy-book cases of compound real options. Traditional compound option models assume a constant volatility over the lifetime of the project. Building on the n-fold compound option model of Cassimon et al. (2004), we extend this model to allow for phase-specific volatility estimates, while preserving the closed-form solution of the model. We illustrate the extended model with a case study of a real option valuation of a multi-stage software application project by a large mobile phone operator and we show how project managers can estimate phase-specific volatilities.
E-info
https://repository.uantwerpen.be/docman/iruaauth/3c8f72/28e3b11edd4.pdf
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