• Bulletin of the Korean Mathematical Society
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• v.48 no.4
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• pp.791-812
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• 2011

This is a survey on American options. An American option allows its owner the privilege of early exercise, whereas a European option can be exercised only at expiration. Because of this early exercise privilege American option pricing involves an optimal stopping problem; the price of an American option is given as a free boundary value problem associated with a Black-Scholes type partial differential equation. Up until now there is no simple closed-form solution to the problem, but there have been a variety of approaches which contribute to the understanding of the properties of the price and the early exercise boundary. These approaches typically provide numerical or approximate analytic methods to find the price and the boundary. Topics included in this survey are early approaches(trees, finite difference schemes, and quasi-analytic methods), an analytic method of lines and randomization, a homotopy method, analytic approximation of early exercise boundaries, Monte Carlo methods, and relatively recent topics such as model uncertainty, backward stochastic differential equations, and real options. We also provide open problems whose answers are expected to contribute to American option pricing.

• Journal of Computing Science and Engineering
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• v.9 no.2
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• pp.51-72
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• 2015

Time predictability is crucial in hard real-time and safety-critical systems. Cache memories, while useful for improving the average-case memory performance, are not time predictable, especially when they are shared in multicore processors. To achieve time predictability while minimizing the impact on performance, this paper explores several time-predictable scratch-pad memory (SPM) based architectures for multicore processors. To support these architectures, we propose the dynamic memory objects allocation based partition, the static allocation based partition, and the static allocation based priority L2 SPM strategy to retain the characteristic of time predictability while attempting to maximize the performance and energy efficiency. The SPM based multicore architectural design and the related allocation methods thus form a comprehensive solution to hard real-time multicore based computing. Our experimental results indicate the strengths and weaknesses of each proposed architecture and the allocation method, which offers interesting on-chip memory design options to enable multicore platforms for hard real-time systems.

• 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.

• Korean Journal of Construction Engineering and Management
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• v.18 no.2
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• pp.81-90
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• 2017

In Imjin River basin, three floods occurred between 1996 and 1999, causing many casualties and economic losses of 900 billion won. In Korea, flood damage is expected to increase in the future due to climate change. This study used the climate scenarios to estimate future flood damage costs and suggested a real options-based economic assessment method. Using proposed method, the flood control infrastructures in Imjin River basin were selected as a case study site to analyze the economic feasibility of the investment. Using RCP (Representative Concentration Pathway) climate scenarios, the future flood damage costs were estimated through simulated rainfall data. This study analyzed the flood reduction benefits through investment in the flood control infrastructures. The volatility of flood damage reduction benefits were estimated assuming that the RCP8.5 and RCP4.5 climate scenarios would be realized in the future. In 2071, the project option value would be determined by applying an extension option to invest in an upgrading that would allow the project to adapt to the flood of the 200-year return period. The results of the option values show that the two investment scenarios are economically feasible and the project under RCP8.5 climate scenario has more flood damage reduction benefits than RCP4.5. This study will help government decision makers to consider the uncertainty of climate change in the economic assessment of flood control infrastructures using real options analysis. We also proposed a method to quantify climate risk factors into economic values by using rainfall data provided by climate scenarios.

• Proceedings of the Korea Technology Innovation Society Conference
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• 2000.11a
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• pp.259-277
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• 2000

In this paper, we suggest theoretical grounds on the problem of R&D portfolio with different option premiums utilizing the Real Options Model, which has received intensified attention as the method of assessment of R&D project with high risk. Even though there have been many studies focused on the evaluation of option value of single project from technology valuation's perspective. there are few study on the portfolio of multiple technology investment by option value using. This paper bears practical importance by showing simple examples with the option value of investment alternatives and the valuation of related risk, the construction of optimum portfolio in technology investment alternatives.

• 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.

• Asian Journal of Innovation and Policy
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• v.7 no.1
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• pp.178-189
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• 2018

In this paper, we present a case study of a new emerging business startup involved in smart house appliances. The irreversible investment concept and real-option theory are introduced as the fundamentals of the model. By using games theory we show that the startup's actions can trigger reactions from other firms. The first part covers initial the research and development stage, while the second part covers production and commercialization. The findings of this study suggest that, given a certain amount of initial investment, an open and shared innovation may lead to hurting a firm's investment while strengthening the competitors' position in the market. However, given the sensitivity analysis, when volatility and demand grow favorably, sharing R&D investment is not a bad option for a new player to adjust its position in the market while still maintaining positive returns.

• Proceedings of the Korea Committee for Ocean Resources and Engineering Conference
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• 2006.11a
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• pp.277-280
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• 2006

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. However, the objectives of maximising the degree of technical performance, maximising the safety levels and minimising the costs incurred are usually in conflict, and the evaluation of the technical performance, safety and costs is always associated with uncertainties, especially for a novel system at the initial concept design stage. 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. It is a Multiple Attribute Decision-Making (MADM) or Multiple Criteria Decision Making (MCDM) framework, which provides a juxtaposition of cost, safety and technical performance of a system during evaluation to assist decision makers in selecting the winning design/procurement proposal that best satisfies the requirement in hand. An illustrative example is used to demonstrate the application of the proposed framework.

• Journal of Internet Computing and Services
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• v.15 no.6
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• pp.15-26
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• 2014

This study focus on a economic value of the Big Data technologies by real options model using big data technology company's stock price to determine the price of the economic value of incremental assessed value. For estimating stochastic process of company's stock price by big data technology to extract the incremental shares, Generalized Moments Method (GMM) are used. Option value for Black-Scholes partial differential equation was derived, in which finite difference numerical methods to obtain the Big Data technology was introduced to estimate the economic value. As a result, a option value of big data technology investment is 38.5 billion under assumption which investment cost is 50 million won and time value is a about 1 million, respectively. Thus, introduction of big data technology to create a substantial effect on corporate profits, is valuable and there are an effects on the additional time value. Sensitivity analysis of lower underlying asset value appear decreased options value and the lower investment cost showed increased options value. A volatility are not sensitive on the option value due to the big data technological characteristics which are low stock volatility and introduction periods.

• Management & Information Systems Review
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• v.28 no.4
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• pp.27-44
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• 2009

Economic value of a certain technology is of great interest and importance in a wide variety of investment circumstances. These vary from companies considering investing in R&D projects, to venture capitalists funding start-up companies. However, such valuation is extremely difficult in any case, and the cost of failure can be very high. Many techniques have been proposed to assist managers facing this issue, from traditional discounted cash flow analysis to more recent methods based on real options. In the meantime, the discounted cash flow method has limitations in applying the valuation of technology. At the same time, there have been various solutions to overcome theoretical problems of the method. Real options have been thought as a solution. However, there are another problems in using them in real world. This paper reviews the previous studies on the valuation of technology in several aspects, discusses the practicability of the various methods available, and explore the application of a hybrid model, which aims to make these rather aore the ideas more accessible to practicing managers.