• The Journal of Information Systems
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• v.22 no.3
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• pp.43-58
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• 2013

This work investigates factors that may affect the choice of real options by ERP project managers. Financial theory suggest that these factors include risk-free interest rate, time to maturity, volatility of net present value, and options exercise price. Other than these factors, we are interested in the exogenous risks related to external uncertainties about technological cost, user learning and consulting, and so forth and we argue these risks should have a significant impact upon the volatility of net present value. To validate these factors empirically, we collected survey questionnaires from ERP project managers in Korea. We find that perceived exogenous risks with regard to ERP projects influence volatility and additionally find that ERP project managers prefer contract options of the project when the volatility of the project is expected to be high. We expect that this work will not only validate theoretical propositions but help project managers consider ERP options strategically based on these factors.

• Journal of Korean Institute of Industrial Engineers
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• v.41 no.3
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• pp.287-295
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• 2015

Due to the latest agreement between the military authorities of the Republic of Korea (ROK) and the United States (US) of America, Korea's annual contribution to the budget of the United States Forces Korea (USFK) rose as high as close to 1 trillion won. This seemingly prohibitive amount has led to the questioning of military critics regarding determination criteria, wholesomeness of cost, alignment of incentives, and implementational transparency, etc. As these sources of mistrust can potentially undermine the congruence of alliance, we attempt to devise a scientific means to test the validity of Korea's budget contribution. Specifically, we use the real options approach (ROA) to estimating the interval of the fair prices of maintaining the USFK. We consider the USFK as an insurance against foreign incursions, and this enables us to assume their role as a put option. Upon a hypothetical war breakout, the daily cumulative size of the Korean economy is estimated by implementing the simulated loss ratios of assets and population. As a result, the strategic value (put premium) of the USFK is exponentially higher the sooner the US forces are augmented following an intrusion. Also, Korea's payments toward the USFK in 2011 and 2012 appear theoretically fairly valued.

• Information Systems Review
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• v.20 no.4
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• pp.43-57
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• 2018

We propose network effects upon the investment decision of cloud-based ERP. Using the survey data collected from 82 companies in 2015, we examine whether IT managers have an intention to adopt real options in order to manage the risk of cloud-based ERP investments and how the network effects influence upon the intention to adopt real options. Based on prior literature, we propose a research model with 4 hypotheses. We find partial support of the hypotheses from the empirical analysis: technological risks has a positive impact upon the adoption of real options such as defer, contract, and abandon. In contrast, we find no significant impact of security risks upon real options. We validate positive network effects upon the adoption of real options such as defer, contract, and abandon. This work empirically find that IT managers in Korean middle and small sized firms have an intention to adopt real options when the managers realize economic, technological, and relationship risks and when they expect network effects.

• 한국경영정보학회:학술대회논문집
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• 2008.06a
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• pp.957-962
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• 2008

We propose a model for the line expansion problem in the AMOLED (Active Matrix Organic Light Emitting Diodes) industry, which now faces market uncertainty: for example, changing customer needs, technological development path, etc. We focus on the optimal investment time and size of the AMOLED production lines. In particular, employed here is the ROV (Real Options Valuation) model to show how to capture the value of line expansion and to determine the optimal investment time. The ROV framework provides a systematic procedure to quantify an expected outcome of a flexible decision which is not possible in the frame of the traditional NPV (Net Present Value) approach. Furthermore, we also use Monte Carlo simulation to measure the uncertainty associated with the line expansion decision; Monte Carlo simulation estimates the volatility of a decision alternative. Lastly, we present a scenario planning to be conducted for what-if analysis of the ROV model.

• Journal of Korea Game Society
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• v.13 no.3
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• pp.69-76
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• 2013

The financial value of early stage start-up has a tendency to depend more on the non-financial factors, but these are not efficiently reflected in the traditional valuation models. Therefore, most of valuation practices for early stage start-ups heavily relied on the guts of experts. To remedy this, this study suggests a model to directly reflect the non-financial factors especially for the real options approach. Actual process of valuation and the adjustment way were developed considering the characteristics of early stage start-ups in the game industry.

• Journal of Korea Technology Innovation Society
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• v.8 no.1
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• pp.29-50
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• 2005

Real options provide a new and productive way to view corporate r&d investment decisions. DCF approach is well established and beloved of financial executives, but is known to systematically underestimate investment value under significant uncertainty. Though real options are not inherent in a r&d investment, they can be used to compute the investment value including managerial flexibility like option value. In this paper, we explain how the interval of option value in black-scholes model can be estimated using simulation. We also present a process framework for interval estimation of volatility and efficient of period of investment value. In such a setting, we can obtain the appropriate interval estimation of the expanded investment value.

• Journal of the Korea Academia-Industrial cooperation Society
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• v.8 no.6
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• pp.1634-1647
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• 2007

"To invest or not to invest?" Most business leaders are frequently faced with this question on new and ongoing projects. The challenge lies in deciding what projects to choose, expand, contract, defer, or abandon. The project valuation tools used in this process are vital to making the right decisions. Traditional tools such as discounted cash flow (DCF)/net present value (NPV) assume a "fixed" path ahead, but real world projects face uncertainties, forcing us to change the path often. Comparing to other traditional valuation methods, the real options approach captures the flexibility inherent to investment decisions. The use of real options has gained wide acceptance among practitioners in a number of several industries during the last few decades. Even though the options are present in all types of business decisions, it is still not considered as a proper method of valuation in some industries. Mining has been comparably slow to adopt new valuation techniques over the years. The reason fur this is not entirely clear. One possible reason is the level and types of risks in mining. Not only are these risks high, but they are also more numerous and involve natural risks compared with other industries. That is why the purpose of this study is to deal with a more practical approach to project valuation, known as real options analysis in mining industry. This paper provides a case study approach to the copper mining industry using a real options analysis. It shows how companies can minimize investment risks, exercise flexibility in decision making and maximize returns.

• Journal of Information Technology Services
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• v.22 no.4
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• pp.81-95
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• 2023

The emergence of Security Token has revolutionized the way assets are traded, bringing efficiency, transparency, and accessibility to the market. However, the Real Estate Security Token market faces challenges, particularly in terms of liquidity. The CMTO(Collateralized Mortgage Token Obligation) model addresses this issue by introducing a novel approach that combines the benefits of NFT(Non-Fungible Token), STO(Security Token Offering), and CMO(Collateralized Mortgage Obligation) techniques to enhance liquidity and promote investment in Real Estate Security Token. The CMTO framework functions by allowing DABS token investors to leverage their tokens as collateral for loans. These token-collateralized loans are pooled together and form the basis for issuing Sequential CMO named CMTO. The CMTO represent a diversified portfolio of token-collateralized loans, providing investors with options based on their financial goals and risk preferences. By implementing CMTO, the Real Estate Security Token market can overcome liquidity challenges, attract a broader range of investors, and unlock the full potential of digital assets in the real estate industry.

• Journal of the Korean Society of Mechanical Technology
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• v.13 no.2
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• pp.9-19
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• 2011

Most real world design evaluation and risk-based decision support combine quantitative and qualitative (linguistic) variables. Decision making based on conventional mathematics that combines qualitative and quantitative concepts always exhibit difficulty in modelling actual problems. The successful selection process for choosing a design/procurement proposal is based on a high degree of technical integrity, safety levels and low costs in construction, corrective measures, maintenance, operation, inspection and preventive measures. In this paper, a design decision support framework using a composite structure methodology grounded in approximate reasoning approach and evidential reasoning method is suggested for design evaluation of machinery space of a ship engine room at the initial stages. An illustrative example is used to demonstrate the application of the proposed framework.

• Journal of the military operations research society of Korea
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• v.31 no.1
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• pp.14-25
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• 2005

Defense offset is considered to be all effective way of acquiring defense critical technologies and arms components as a counter-trade obligation ill defense acquisition contracts. Although arranging the offset contracts is wide]y perceived as necessary, there hardly exists an acceptable model of valuation of the offset technology. By undertaking the technology valuation approach and applying the option approach tn the offset program, we present an offset technology valuation model that maximizes social net benefit of the countries transferring the technology. This article applies our model to an actual case of defense technology transfer in the Republic of Korea. The contribution of this paper is in applying the option approach to the valuation of defense onset technology, providing for the additional flexibility to tile analysis. Our research suggests several policy implications that can be applied to the actual process of defense offsets. Our results elucidate managers' role and responsibilities in designing such a process by applying option approaches.