• Korean Journal of Construction Engineering and Management
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• v.17 no.1
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• pp.76-82
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• 2016

Decision-making in construction projects often include options features. Such embedded options are difficult to value properly and many decision makers do not have experience in option analysis. The purpose of this paper is to demonstrate how real option analysis can be used to value capital expenditures on construction materials. We propose a real option framework to evaluate decision-making processes involving the purchase of construction materials. A case study was conducted by evaluating the purchase decision-making of solar cells, a good with high price volatility. Using real option analysis two strategies to improve the financial feasibility of installing a solar panel system were derived. The first strategy involves using a price cap that gives the project manager the right, but not obligation, to buy the modules for a predefined price during the next year. The second strategy is to defer the purchase of the solar cells until future price information becomes clearer. Both of the strategies in the case study were valued using the binominal model. This study will help to improve the financial feasibility of purchasing construction materials with high price volatility by including the value of managerial flexibility.

• Journal of Climate Change Research
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• v.3 no.4
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• pp.271-280
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• 2012

The study aims to analyze economic viability of Integrated Gasification Combined Cycle, an innovative technology to utilize clean coal effectively and efficiently in the era of energy crisis. The study is conducted to evaluate business value of 300 MW IGCC demonstration plant technology development based on binomial option, in consideration of uncertainty of fuel price. Binomial option is one of the real option valuation methods, which is ideally suited to irreversible decision making under uncertainty. With this analysis, it shows that investment value is higher compared with economic evaluation based on discounted cash flow, since this method can measure quantity. As a result, this study is proved to be economically feasible, which have a positive impact on the next generation of IGCC and the connection with Carbon Capture and Storage.

• Environmental and Resource Economics Review
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• v.12 no.2
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• pp.217-244
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• 2003

As energy industry is undergoing a rapid structural changes, economic feasibility analysis based on the conventional discounted cash flow (DCF) method has limitations to incorporate management's flexibilities. We present a real options pricing method (ROPM) which can be applied to an energy sector as an alternative. In order to examine the usefulness of ROPM, this study compares the result of DCF method applied to the investment of cogeneration power plant with that based on the ROPM incorporating the value of real of options inherent in the project. The simulation results show that the value of investment opportunities improves using ROPM compared to that with the conventional DCF methods. Therefore, a specific project which appears to be unprofitable from the conventional point of view could be, actually, an economically feasible one based on ROPM method, when properly incorporating the management's flexibilities inherent in the project.

• The Korean Journal of Financial Management
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• v.27 no.2
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• pp.85-114
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• 2010

Using the financial institutions that have adopted performance-based stock option plan, this paper examines whether performance-based executive stock options improves effectively firm value. Over the period 2002~2005, we investigate short-term and long-term effects of the performance-based stock options on stock price. The empirical results are summarized as follows. First, the announcement of plain vanilla stock options generates no significant effects on firm value. Meanwhile, the announcement of performance-based stock options results in negative and significant abnormal returns, which is contrary to the expectation. In addition, we find that there are strong, significant and negative announcement effects when banks grant performance-based stock options. Secondly, there is no significant difference between the long-term performance of the sample granting stock options and that of the benchmarks, which is similar to the findings of the previous research. Also, we fail to get any evidence that performance-based stock option awards have improved the long-term firm value.

• Journal of Korea Port Economic Association
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• v.28 no.3
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• pp.235-257
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• 2012

Recently the role of ports has been changed to satisfy flexibly needs of demands in global economy. A new concept for ports is not just a place for international trade but an important nodal point in logistics chain. The changing environment like this trend creates a high degree of uncertainty and leaves port managers confused with the question how to respond effectively to dynamic market. The latest studies provide that the port must have a good hinterland to achieve competitive advantages in a logistics chain. Korean Government announced "The Master Development Plan for Port Logistics Parks in Korea" in 2006. This contains the plan of hinterland construction of Busan New Port to achieve the status of logistics hub in Asian market. Previous studies rely solely on traditional DCF(discounted cash flow) analysis for investment of hinterland. However DCF method does not include irreversibility, uncertainty and the choice of timing for investment project. This thesis introduces a ROPM(real options pricing model) which overcomes the limitations of traditional valuation methods. The option valuations in this study utilize the Black-Scholes model, the binomial model and the MonteCarlo simulation to value investment opportunity of a port hinterland. In this thesis, an attempt is made to modify the NPV criterion by incorporating the real options approach, and its application is demonstrated in a hinterland construction investment plan. This research has conducted an empirical analysis by calculating economic value of the investment for a hinterland of Busan New Port.

• Proceedings of the KAIS Fall Conference
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• 2009.12a
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• pp.398-401
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• 2009

민간 주도형 사회간접자본 (social overhead capital :SOC) 사업은 BOT(build-operate-transfer)를 비롯하여 대상 프로젝트의 정부 정책 등의 여러 환경의 변경에 따라 다양하게 변형되어 적용되어 BTL(build-lease-transfer), BOO (build-own-operate)등의 여러 기법들을 사용된다. 민간 SOC 사업은 프로 젝트의 규모와 장기에 걸친 공사의 불확실성 때문에 프로젝트의 경제성 분석을 하는 것은 복잡하다. 일반적으로 사용하고 있는 현금흐름 할인모형(discount cash flow model; DCF)은 미래의 불확실성 변수들을 적절히 반영하지 못한다는 한계점을 가지고 있지만 현실적으로 많이 쓰이고 있는 방식이다. 본 논문은 옵션기반모형에 근거한, BOT-옵션가치평가(BOT-OV)모형을 국내 민간 SOC 사업의 경제성 분석을 위해 적용한다. BOT-OV모형을 적용하는 것이 기존 순현재가치(net present value; NPV)방식을 통하여 프로젝트 가치 평가 할 때보다 더 정밀한 경제적 타당성 평가를 할 수 있다는 것을 확인하여 기존의 NPV 평가방식의 방법을 대체할 수 있는 가능성을 확인하는데 의의가 있다고 할 수 있다.

• Journal of the Korea Academia-Industrial cooperation Society
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• v.11 no.4
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• pp.1442-1448
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• 2010

The evaluation of the financial viability of a privatized infrastructure project is complex because of the uncertainties involved due to the project's scale, long concession period and complexity. Use the BOT option valuation(BOT-OV) model, for evaluating the financial analysis of a privatized infrastructure project. This sophisticated for financial evaluation compared with a traditional NPV analysis.

• The Korean Journal of Applied Statistics
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• v.24 no.1
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• pp.83-92
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• 2011

This paper examines empirically Durham's (2008) asset pricing models to the KOSPI200 index. This model Incorporates the VKOSPI index as a proxy for 1 month integrated volatility. This approach uses option prices to back out implied volatility states with an explicitly speci ed risk-neutral measure and risk premia estimated from the data. The application uses daily observations of the KOSPI200 and VKOSPI indices from January 2, 2003 to September 24, 2010. The empirical results show that non-affine model perform better than affine model.

• 한국IT서비스학회:학술대회논문집
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• 2008.11a
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• pp.108-111
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• 2008

최근 급격한 증가세를 보이고 있는 신재생에너지 사업중의 하나인 태양광 발전사업은 아직까지는 기술적, 사회적으로 초기 발전단계를 지나고 있다. 또한 원자재를 포함한 글로벌 실물경제의 변동성이 심하고 에너지 산업분야의 기술수준 역시 급변하고 있으며, 에너지 산업이 과거와 달리 자유경쟁 체제로 변화하고 있어서 태양광 발전사업의 가치를 평가하여 사업에 진입하고자 하는 의사결정을 갈수록 어렵게 하고 있다. 본 논문에서는 실물옵션 기반의 투자가치 평가방법을 적용하여 태양광 발전사업의 사업 투자가치와 최적투자시점을 분석한다. 전력판매가격과 초기투자비용 등의 불확실성에 대해 사업자가 대응 가능하도록 이항격자 모형을 통한 분석을 시도하고, 기존의 현금흐름할인법을 기반으로 한 사업성분석 결과와 비교하였다.

• Journal of the Korea Academia-Industrial cooperation Society
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• v.8 no.4
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• pp.881-893
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• 2007

IT(Information Technology)-based industries have caused a recent digital revolution and the appearance of various types' information service, being largely expanded toward info-communication device company, info-communication service company, software company etc.. Therefore, the needs to evaluate the company value of IT business for M&A or liquidation are growing tremendously. Unlike other industries, however, IT industry has a short lift cycle and so it doesn't have not only a company value-evaluating model for general businesses but the objective one for IT companies yet. So, this thesis analyzes various value-evaluating technique and newly rising ROV. DCF, the change method of company's cash flow including tangible assets into future value, had been applied during the past industrialization economy era and has been persuasively applied to the present. However, the DCF valuation has no option but to make many mistakes because IT companies have more intangible assets than tangible assets. Accordingly, it is ROV, recognized as the new method of evaluating companies' various options normally and quantitatively, that is brought up recently. But the evaluation on the companies' various options is too subjective and theoretical up to now and due to the lack of objective ground and options, it's not possible to be applied to reality. In this thesis, it is found that ROV is more accurate than DCF, comparing DCF and ROV through four examples. As the options applied to ROV are excessively limited, we tried to develop ROV into a new method by deriving five invisible value factors within IT companies. Therefore, on this occasion, we should set up the basic valuation methods on IT companies and should research and develop an effective and various valuation methods suitable to each company like an internet-based company, a S/W developing enterprise, a network-related company among IT companies.