Many information resource managers have learned to be proactive in today’s highly competitive business environment. However, limited financial resources and many uncertainties require them to maximize their shareholders’ equity while controlling the risks incurred at an acceptable level. As the unprecedented development in information technology continuously produces great opportunities that ar...

In the more than 25 years since the term “real options” was coined by Stewart Myers, several approaches have been proposed for calculating the real option value of a potential corporate investment. Unfortunately, the assumptions underlying these various approaches and the conditions that are appropriate for their application are often not spelled out. Where they are spelled out or can be inferr...

We present the application of real options analysis (ROA) to a managerial decision-making problem. A case study was developed to illustrate the mathematical steps required to apply ROA. The results of this model show that a net present value analysis, which is most often used in practice, would have led to a sub-optimal decision, as it does not take into account the value of future options and ...

A common practice among large retailers is the low-price guarantee, rebating consumers if they find an identical product cheaper elsewhere. This provides consumers with some level of comfort in their purchase decision. A similar low-price guarantee is provided by numerous service industries that allow reservation of capacity, yet do not penalize the consumer for failure to keep that reservation...

Automatic, or robotic, milking systems have the potential to significantly change the way milk is produced on U.S. dairy farms. However, there is a high degree of uncertainty associated with adoption of this new technology. A real options approach is used to analyze the decision to replace an operational milking system with an automatic milking system. The most important source of uncertainty i...

Complex systems and enterprises, such as those typical in the aerospace industry, are subject to uncertainties that may lead to suboptimal performance or even catastrophic failures if unmanaged. This work focuses on flexibility as an important means of managing uncertainties and leverages real options analysis that provides a theoretical foundation for quantifying the value of flexibility. Real...

t he relationship between the price of oil and the level of economic activity is a fundamental empirical issue in macroeconomics. in this research, by using a multivariate garch-in-mean var, we try to investigate direct effects of uncertainty of oil price on macroeconomics of iran by using annually data from 1965 to 2013.results show that uncertainty about oil prices had a negative and signific...

HARRIET BLACK NEMBHARD1,∗, LEYUAN SHI2 and MEHMET AKTAN3 1Harold and Inge Marcus Department of Industrial and Manufacturing Engineering, The Pennsylvania State University, University Park, PA 16802, USA E-mail: [email protected] 2Department of Industrial Engineering, University of Wisconsin-Madison, Madison, WI 53706, USA E-mail: [email protected] 3Department of Industrial Engineering, Atat...

In many real world systems, two types of uncertainties exist: those that evolve in small, continuous increments and those that may create large, discrete changes in the system. The field of engineering real options posits that flexible system designs can improve system performance in the face of such uncertainties. However, up to now, most analyses of engineering real options deal with one type...