• Journal of Korea Technology Innovation Society
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• v.20 no.3
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• pp.732-753
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• 2017

Recently, when evaluating the technology values in the fields of biotechnology, pharmaceuticals and medicine, we have needed more to estimate those values in consideration of the period and cost for the commercialization to be put into in future. The existing discounted cash flow (DCF) method has limitations in that it can not consider consecutive investment or does not reflect the probabilistic property of commercialized input cost of technology-applied products. However, since the value of technology and investment should be considered as opportunity value and the information of decision-making for resource allocation should be taken into account, it is regarded desirable to apply the concept of real options, and in order to reflect the characteristics of business model for the target technology into the concept of volatility in terms of stock price which we usually apply to in evaluation of a firm's value, we need to consider 'the continuity of stock price (relatively minor change)' and 'positive condition'. Thus, as discussed in a lot of literature, it is necessary to investigate the relationship among volatility, underlying asset values, and cost of commercialization in the Black-Scholes model for estimating the technology value based on real options. This study is expected to provide more elaborated real options model, by mathematically deriving whether the ratio of the present value of the underlying asset to the present value of the commercialization cost, which reflects the uncertainty in the option pricing model (OPM), is divided into the "no action taken" (NAT) area under certain threshold conditions or not, and also presenting the estimation logic for option values according to the observation variables (or input values).

• Korean Journal of Construction Engineering and Management
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• v.16 no.5
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• pp.114-122
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• 2015

Real estate development requires significant amount of capital investment. The project duration has been increased according to its enlarged size. For this reason, cost overrun and time delay are important risk factors that should be managed properly. As a method to hedge the risk, varoius real option methods have been presented. However, conventional project value assesment methods such as NPV(Net Present Value) have weakness to support decision making by reflecting dynamic situations in terms of variation of cost and time. Furthermore, the decision making process is serious of actions rather than discrete event. The purpose of this paper is to present a multiple real option valuation method to overcome the deterministic aspect of real option presented in previous research and practice. The method is developed as following: firstly, to select the model that can be applied in the real estate development project through a survey from previous literature on real options analysis; secondly, to apply data from office development case in order to verify the model by applying conventional real option and multiple real option valuation. According to analysis result, multiple real option provides enhanced values comparing to NPV and single real option.

• Proceedings of the Korean Operations and Management Science Society Conference
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• 2003.05a
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• pp.612-619
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• 2003

실물옵션은 전통적인 경제성 평가기준의 하나인 순현재가치 분석법이 의사결정 과정에서 경영의 유연성을 무시함으로써 투자 혹은 자산의 가치를 낮게 평가하는 단점을 제거하고 이를 평가에 적절히 포함시킬 수 있다고 여겨지고 있어 새로운 평가방법으로 주목을 받고 있다. 특히, 정보기술(IT) 분야에서는 다음과 같은 이유 때문에 전통적인 현금흐름할인 방법이 효과적이지 못할 수 있다. (1) 우선, 정보통신 분야에서 대부분의 정보기술 기반 투자 프로젝트는 막대한 자본이 소요되기 때문에 기업들은 이를 피하기 위하여 단계적인 투자계획을 세우는 경우가 많다. (2) 또한, 초기 기반에 대한 투자의 주요한 혜택이 대부분 그 이후 단계의 투자에서 구현되기 때문에 성급한 초기투자에 대한 경제성 평가는 이후의 혜택을 무시할 가능성이 많아진다. (3) 마지막으로 초기의 투자 프로젝트에 참여하지 못하면, 이 후의 프로젝트에 참여하기 어렵기 때문에 미래의 혜택을 얻을 수 없게 된다. 이러한 여러 가지 이유로 이를 적절히 평가할 수 있는 실물옵션 평가방법이 선호된다. 본 연구에서는 정보통신 분야의 투자와 같은 대규모 프로젝트의 특징을 평가방법의 입장에서 살펴보고, 실물옵션 개념을 응용하여 이러한 투자 형태의 평가를 위한 모델을 개발하고 적용방법을 생각해본다.

• Proceedings of the Korean Institute Of Construction Engineering and Management
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• 2008.11a
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• pp.606-609
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• 2008

Traditionally, the feasibility of the private investment is determined by NPV(Net Presented Value) based on DCF(Discounted Cash Flow) and the volume of government's subsidiary without quantifying the effect of overturn share ratio and MRG(Minimum Revenue Guarantee), these variables which can seriously effect on the economic feasibility. One of the most important reasons why these variables are not underestimated is that the quantifying methods are insufficiently or so complicatedly studied to apply practically the real project. Therefore, this study suggests the modified binominal option model to estimate the overturn share ratio and MRG and estimates how much these variables impact the private investment. Also, these results are helpful to estimate how much the government's subsidiary can be reduced.

• Journal of Korea Game Society
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• v.14 no.4
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• pp.67-74
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• 2014

Real options valuation models are now proved as a effective valuation method both in Theoretically and empirically. However, to use real options model for early stage start-ups, additional non-financial information is crucial in the valuation process. Previous studies theoretically suggested the modified real options valuation model and process to use non-financial information in the valuation of early stage startups, but there is no empirical evidence on the suggested model. Therefore, this study investigated the effectiveness of the modified real options valuation model using a case study. The case study result showed that the modified real options valuation effectively reflect the non-financial information in early stage startups, and decrease the forecasting error in the valuation process.

• Journal of Korea Technology Innovation Society
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• v.14 no.3
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• pp.578-598
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• 2011

This study estimates the value of photovoltaic core material technology, which is getting attention as a clean energy source. The estimation is based on the real option pricing model (ROPM). This study has two main contributions. The first is in the methodology. The process of modeling volatility, which is the most complicated stage in ROPM, is greatly simplified by using the stock price as a covariate representing the volatility of the real option's basic asset. The second contribution is the application of technology. In this study, the economic value of poly-silicon, a core material in the photovoltaic industry and recently surging in demand, is evaluated as a manufacturing technology. In a case study of a company in the photovoltaic industry, the stochastic process of a basic asset follows geometric Brownian motion (GBM), and the option value of firm A's poly-silicon manufacturing technology is estimated at 3.4 trillion won.

• Plant Journal
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• v.8 no.3
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• pp.42-48
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• 2012

Under traditional analysis of the capital budgeting, NPV, it is assumed that management cannot react to deviation from the expected scenario of cash flow at the time of evaluation. In practice, however, it is less likely that the expected scenario will come true when new information arrives and uncertainty is resolved. Uncertainty and risk can be influenced through 'managerial flexibility', which becomes a central instrument for value creation. Real option framework including option to defer, option for staged investment, option to alter, option to abandon, option to switch, etc. takes this managerial flexibility into account. Therefore, it is more appropriate to use real option method to evaluate the project than the traditional DCF(discounted cash flow) tool if the firm has high volatility of the expected returns.

• Korean Journal of Construction Engineering and Management
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• v.22 no.6
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• pp.87-95
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• 2021

This study analyzed economic feasibility using the real options theory of the eco-environment area project in Saemangeum. I defined the main factors affecting project sales during the 30 years operation period. The real option-based analysis is proposed through the managerial flexibility by estimating the volatility of project sales using scenarios analysis method. The number of visitors, admission fee, leisure program fee, and O&M costs required for economic analysis of eco-environment park were analyzed by reviewing cases of similar eco-environment parks in Korea. The option value is calculated by assuming that the developers have an option right that can be abandoned. B/C is less than 1 and NPV is negative, so it is impossible to proceed with the project using the traditional economic analysis. The project value difference between NPV (-46.6 billion Won) and option value (28.1 billion Won) increased by 74.7 billion Won. Through this study, decision-makers of public institutions and private developers who plan eco-environment area projects will be able to use the real option technique proposed in this study.

• Journal of the Korea Academia-Industrial cooperation Society
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• v.12 no.7
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• pp.3016-3021
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• 2011

While there is ample information on the investment plans about Korea's selected new growth businesses, it is hard to find any analysis on the valuation of the projects. In this paper, I intend to do a valuation for the three particular technologies, which are solar cell, automotive battery, and bio-pharmaceutical, based on compound option model so that the valuation can capture not only the expected net cash flow but also the value originated from the flexibility of the decision maker. In addition, the real option pricing theory is reviewed and its practical limitations are thoroughly investigated.

• Environmental and Resource Economics Review
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• v.13 no.4
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• pp.735-761
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• 2004

As a possible alternative to Traditional Discounted Cash Flow Method, "Option Pricing Model" has drawn academic attentions for the last a few decades. However, it has failed to replace traditional DCF method practically due to its mathematical complexity. This paper introduces an option pricing valuation model specifically adjusted for the natural resource development projects. We add market information and industry-specific features into the model so that the model remains objective as well as realistic after the adjustment. The following two features of natural resource development projects take central parts in model construction; product price is a unique source of cash flow's uncertainty, and the projects have cost structure from capital-intense industry, in which initial capital cost takes most part of total cost during the projects. To improve the adaptability of Option Pricing Model specifically to the natural resource development projects, we use Two-Factor Model and Long-term Asset Model for the analysis. Although the model introduced in this paper is still simple and reflects limited reality, we expect an improvement in applicability of option pricing method for the evaluation of natural resource development projects can be made through the process taken in this paper.