Competition, Dedicated Assets, and Technological Obsolescence in Multistage Infrastructure Investments: A Sequential Compound Option Valuation

Autor:	Chia-Chi Pi, Yu-Lin Huang
Rok vydání:	2011
Předmět:	business.industry Technological change Financial economics Strategy and Management Cost accounting Compound option Market risk Obsolescence Economics Call option Electrical and Electronic Engineering business Risk management Industrial organization Valuation (finance)
Zdroj:	IEEE Transactions on Engineering Management. 58:141-153
ISSN:	1558-0040 0018-9391
DOI:	10.1109/tem.2010.2048910
Popis:	Multistage investments are common in area-wide developments of privatized telecommunication networks and other complex infrastructure systems. They represent an incremental strategy that maintains flexibility in managing market risks, funding needs, and resource constraints in geographical expansions. Though compound options can be used to valuate multistage investments, their valuation is complex when the project in question requires upfront and interim investments in dedicated assets for future expansions. The problem becomes more complex when infrastructure markets are competitive and the investment in question is prone to rapid technological progress, which quickly makes the currently best in-use technology obsolete. This paper develops a European sequential compound call option pricing model to valuate multistage investments and analyze how competition, dedicated assets, and technological obsolescence influence the value of flexibility in this incremental strategy.
Databáze:	OpenAIRE
Externí odkaz:	https://explore.openaire.eu/search/publication?articleId=doi_________::1209e2b769e17b8ce25698b6485517cd https://doi.org/10.1109/tem.2010.2048910 Zobrazit plný text záznamu