A review of real options approaches: applying models to value a medical device project
by Kelsey Barton; Yuri Lawryshyn
International Journal of Business Innovation and Research (IJBIR), Vol. 11, No. 1, 2016

Abstract: A number of practical real options approaches in literature, some of which have been embraced by industry, lack financial rigour, while many theoretical approaches are not practically implementable. Industry surveys reveal that managers are reluctant to apply some of the more theoretical real options approaches due to their lack of transparency, their complexity, and because of the lack of firm acceptance and top management support. In this paper we compare and contrast five real options approaches designed for managers and apply each to value a medical device product development project. The medical device project is modelled as a compound call option, and the results are contrasted to a traditional NPV calculation. Issues of volatility estimation and the possibility of arbitrage opportunities in the pricing procedures are examined.

Online publication date: Thu, 07-Jul-2016

The full text of this article is only available to individual subscribers or to users at subscribing institutions.

 
Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.

Pay per view:
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.

Complimentary Subscribers, Editors or Members of the Editorial Board of the International Journal of Business Innovation and Research (IJBIR):
Login with your Inderscience username and password:

Username:        Password:          Forgotten your password?

Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.

If you still need assistance, please email subs@inderscience.com