Title :
Asian real option: New approach to project economic valuation
Author :
Zahra, Shahrokhshahi ; Reza, Raei
Author_Institution :
Dept. of Ind. Eng., Mazandaran Univ. of Sci. & Technol., Babol, Iran
Abstract :
Nowadays Real option is highly regarded, however many believe that its result cannot be completely relied, because real option overestimates value of flexibility. The difference in the real world and financial market properties is one of the main reasons for the inappropriate flexibility estimation. In this paper, we merge real option and Asian option concept to estimate the value of investment more realistically, according to real decision making properties and Asian option similarity to real world situations. Asian option is a type of financial options that is used for specific market conditions. Furthermore, a case study is done to illustrate the application of our approach. As expected, Asian real option less estimate the flexibility value than vanilla option.
Keywords :
decision making; economics; stock markets; Asian real option; decision making properties; financial market properties; project economic valuation; vanilla option; Cost accounting; Asian real option; Project evaluation; Real option; binomial bushy tree;
Conference_Titel :
Information Management, Innovation Management and Industrial Engineering (ICIII), 2012 International Conference on
Conference_Location :
Sanya
Print_ISBN :
978-1-4673-1932-4
DOI :
10.1109/ICIII.2012.6339881