Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
478720 | European Journal of Operational Research | 2010 | 13 Pages |
Abstract
In this paper, we use the market asset disclaimer assumption and develop a binomial lattice based real options model to include cash flow interdependencies between multi-stage information technology (IT) investments. Using a simple two-stage IT investment problem with interdependent cash flows, we apply the binomial lattice based real options model to obtain combined valuation of the two-stage IT investment. In addition to investment valuation, our experience with the two-stage IT investment valuation suggests that the binomial lattice based real options model provides a powerful decision aid tool for appropriate timing, delaying and abandoning of the second-stage IT investment.
Keywords
Related Topics
Physical Sciences and Engineering
Computer Science
Computer Science (General)
Authors
Parag C. Pendharkar,