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Valuing modularity as a real option

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Author Info
Andrea GAMBA (Departement of Economics, University of Verona)
Nicola FUSARI (University of Lugano and Swiss Finance Institute)
Abstract

We 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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Publisher Info
Paper provided by Swiss Finance Institute in its series Swiss Finance Institute Research Paper Series with number 08-20.

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Length: 29 pages
Date of creation: Jan 2008
Date of revision:
Handle: RePEc:chf:rpseri:rp0820

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Web page: http://www.SwissFinanceInstitute.ch
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Related research
Keywords: Real options; Modularity; Least Squares Monte Carlo;

Find related papers by JEL classification:
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:

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This page was last updated on 2009-11-30.

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