Valuing modularity as a real option
AbstractWe provide a general valuation approach for capital budgeting decisions involving the modularization of a system. Within the framework developed by Baldwin and Clark (2000), we implement an approach using a numerical procedure based on the Least Squares Monte Carlo method proposed by Longstaff and Schwartz (2001). The approach is accurate, general and flexible.
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Bibliographic InfoPaper provided by Swiss Finance Institute in its series Swiss Finance Institute Research Paper Series with number 08-20.
Length: 29 pages
Date of creation: Jan 2008
Date of revision:
Real options; Modularity; Least Squares Monte Carlo;
Other versions of this item:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
- G3 - Financial Economics - - Corporate Finance and Governance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-11-11 (All new papers)
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