Journal of Korean Society of Industrial and Systems Engineering (산업경영시스템학회지)

Society of Korea Industrial and System Engineering (한국산업경영시스템학회)
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The Default Risk of the Research Funding with Uncertain Variable in South Korea, Along with the Greeks

옵션민감도를 고려한 기술자금의 경제적 가치와 실패확률

  • Sim, Jaehun (Department of Smart Manufacturing Engineering, Changwon National University)
  • 심재훈 (창원대학교 스마트제조융합협동과정)
  • Received : 2020.12.04
  • Accepted : 2020.12.31
  • Published : 2021.03.31
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Abstract

As a nation experiencing rapid economic growth, South Korea and its government have made a continuous effort toward efficient research investments to achieve transformation of the Korean industry for the fourth industrial revolution. To achieve the maximum effectiveness of the research investments, it is necessary to evaluate its funding's worth and default risk. Thus, incorporating the concepts of the Black-Scholes-Merton model and the Greeks, this study develops a default-risk evaluation model in the foundation of a system dynamics methodology. By utilizing the proposed model, this study estimates the monetary worth and the default risks of research funding in the public and private sectors of Information and Communication technologies, along with the sensitivity of the R&D economic worth of research funding to changes in a given parameter. This study finds that the public sector has more potential than the private sector in terms of monetary worth and that the default risks of three types of research funding are relatively high. Through a sensitivity analysis, the results indicate that uncertainty in volatility, operation period, and a risk-free interest rate has trivial impacts on the monetary worth of research funding, while volatility has large impacts on the default risk among the uncertain factors.

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