Finance and Credit
 

Abstracting and Indexing

РИНЦ
Referativny Zhurnal VINITI RAS
Worldcat
LCCN Permalink
Google Scholar

Online available

EBSCOhost
Eastview
Elibrary
Biblioclub

Archiving

Cyberleninka (12 month OA embargo)

Managing the innovation projects of corporations by means of compound real options

Vol. 25, Iss. 3, MARCH 2019

Received: 15 January 2019

Received in revised form: 29 January 2019

Accepted: 12 February 2019

Available online: 29 March 2019

Subject Heading: INVESTING

JEL Classification: D81, G31, G32, O22, O32

Pages: 691–708

https://doi.org/10.24891/fc.25.3.691

Yashin S.N. National Research Lobachevsky State University of Nizhny Novgorod (UNN), Nizhny Novgorod, Russian Federation
jashinsn@yandex.ru

https://orcid.org/0000-0002-7182-2808

Koshelev E.V. National Research Lobachevsky State University of Nizhny Novgorod (UNN), Nizhny Novgorod, Russian Federation
ekoshelev@yandex.ru

https://orcid.org/0000-0001-5290-7913

Kuptsov A.V. National Research Lobachevsky State University of Nizhny Novgorod (UNN), Nizhny Novgorod, Russian Federation
kav191982@yandex.ru

ORCID id: not available

Subject The article investigates the issues of assessing the entire pool of strategic prospects for business development related to a particular innovation project.
Objectives The aim is to develop a model to estimate the cost of a project with its real options.
Methods The study presents a model to assess compound real options that have several underlying assets in the form of various projects or scenarios of their development. Technically, the structure of such compound real options involves a number of real options like the option to contract, the option to abandon, the option to expand, the deferment option, etc. in addition to project evaluation using the net present value method.
Results It is important to properly structure compound real options, i.e. to stick to the sequence as described in the methodology. The sequence of planning a compound option is subject to the logic of planning the business and particularly the production.
Conclusions The findings may be useful for manufacturing company financial analysts and top managers to make adequate decisions on investment and innovation project efficiency.

Keywords: innovation project, compound real option

References:

  1. Damodaran A. Investment Valuation: Tools and Techniques for Determining the Value of Any Asset. New York, John Wiley & Sons, Inc., 2002, 993 p.
  2. Roche J. The Value of Nothing: Mastering Business Valuations. London, Global Professional Publishing, 2005, 250 p.
  3. Limitovskii M.A. Investitsionnye proekty i real'nye optsiony na razvivayushchikhsya rynkakh: monografiya [Investment projects and real options in developing markets]. Moscow, RANEPA Publ., 2004, 527 p.
  4. Black F., Scholes M. The Pricing of Options and Corporate Liabilities. Journal of Political Economy, 1973, vol. 81, iss. 3, pp. 637–654.
  5. Cox J.C., Ross S.A., Rubinstein M. Option Pricing: A Simplified Approach. Journal of Financial Economics, 1979, vol. 7, iss. 3, pp. 229–263. URL: Link90015-1
  6. Trigeorgis L. Real Options: Managerial Flexibility and Strategy in Resource Allocation. The MIT Press, 1996, 427 p.
  7. Copeland T.E., Antikarov V., Copeland T. Real Options: A Practitioner's Guide. Texere, 2001, 320 p.
  8. Jabbour G.M., Kramin M.V., Young S.D. Two-State Option Pricing: Binomial Models Revisited. The Journal of Futures Markets, 2001, vol. 21, iss. 11, pp. 987–1001. URL: Link
  9. Mun J. Real Options Analysis: Tools and Techniques for Valuing Strategic Investments and Decisions. USA, New Jersey, John Wiley & Sons, 2005, 704 p.
  10. Hull J.C. Options, Futures and Other Derivatives. Prentice-Hall, 6th edition, 2005, 816 p.
  11. Bastian-Pinto C.L., Brandao L.E.T., Ozorio L.M. A Symmetrical Binomial Lattice Approach, for Modeling Generic One Factor Markov Processes. URL: Link
  12. Haahtela T. Recombining Trinomial Tree for Real Option Valuation with Changing Volatility. URL: Link
  13. Boyle P.P. A Lattice Framework for Option Pricing with Two State Variables. Journal of Financial and Quantitative Analysis, 1988, vol. 23, no. 1, pp. 1–12. URL: Link
  14. Tian Y. A Modified Lattice Approach to Option Pricing. The Journal of Futures Markets, 1993, vol. 13, iss. 5, pp. 563–577. URL: Link
  15. Derman E., Kani I., Chriss N. Implied Trinomial Trees of the Volatility Smile. Quantitative Strategies Research Notes, 1996. URL: Link
  16. Rubinstein M. Displaced Diffusion Option Pricing. The Journal of Finance, 1983, vol. 38, no. 1, pp. 213–217. URL: Link
  17. Camara A. The Valuation of Options on Multiple Operating Cash Flows. URL: Link
  18. Haahtela T. Extended Binomial Tree Valuation when the Underlying Asset Distribution is Shifted Lognormal (with Higher Moments). Real Options: Theory Meets Practice, 10th Annual International Conference, 14–17 June, 2006, USA, New York. URL: Link
  19. Kodukula P., Papudesu Ch. Project Valuation Using Real Options: A Practitioner's Guide. USA, Florida, Fort Lauderdale, J. Ross Publishing, 2006, 256 p. URL: Link
  20. Chance D.M. Introduction to Derivatives and Risk Management. Thomson South Western, 2004, 675 p.
  21. Smit H.T.J., Trigeorgis L. Strategic Investment: Real Options and Games. Princeton University Press, 2004, 504 p.
  22. Yashin S.N., Trifonov Yu.V., Koshelev E.V. Formirovanie mekhanizma upravleniya innovatsionnym razvitiem promyshlennogo regiona [ Building a mechanism to manage innovative development of the industrial region]. Nizhny Novgorod, Pechatnaya Masterskaya RADONEZh Publ., 2017, 276 p.

View all articles of issue

 

ISSN 2311-8709 (Online)
ISSN 2071-4688 (Print)

Journal current issue

Vol. 25, Iss. 5
May 2019

Archive