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The Valuation of New Ventures

  • L. Sereno

Traditional tools fail to capture the value of new ventures, such as R&D projects and start-up companies, because of their dependence on future events that are uncertain at the time of the initial decision. In the real options setting the value of these investments is the value of the follow-on opportunities they may create. Our aim is to study the multicompound option approach to value sequential investment opportunities taking into account multiple interactions among real options.

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Paper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number 554.

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Date of creation: 2006
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Handle: RePEc:bol:bodewp:554
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  1. Pindyck, Robert S., 1993. "Investments of uncertain cost," Journal of Financial Economics, Elsevier, vol. 34(1), pages 53-76, August.
  2. Robert C. Merton, 1973. "Theory of Rational Option Pricing," Bell Journal of Economics, The RAND Corporation, vol. 4(1), pages 141-183, Spring.
  3. Gukhal, C.R.Chandrasekhar Reddy, 2004. "The compound option approach to American options on jump-diffusions," Journal of Economic Dynamics and Control, Elsevier, vol. 28(10), pages 2055-2074, September.
  4. Elettra, Agliardi & Rossella, Agliardi, 2003. "A generalization of the Geske formula for compound options," Mathematical Social Sciences, Elsevier, vol. 45(1), pages 75-82, February.
  5. Whaley, Robert E., 1981. "On the valuation of American call options on stocks with known dividends," Journal of Financial Economics, Elsevier, vol. 9(2), pages 207-211, June.
  6. Jonathan B. Berk, 2004. "Valuation and Return Dynamics of New Ventures," Review of Financial Studies, Society for Financial Studies, vol. 17(1), pages 1-35.
  7. Majd, Saman & Pindyck, Robert S., 1987. "Time to build, option value, and investment decisions," Journal of Financial Economics, Elsevier, vol. 18(1), pages 7-27, March.
  8. Andrew B. Abel & Avinash K. Dixit & Janice B. Eberly & Robert S. Pindyck, . "Options, the Value of Capital, and Investment," Rodney L. White Center for Financial Research Working Papers 15-95, Wharton School Rodney L. White Center for Financial Research.
  9. Alvarez, Luis H. R. & Stenbacka, Rune, 2001. "Adoption of uncertain multi-stage technology projects: a real options approach," Journal of Mathematical Economics, Elsevier, vol. 35(1), pages 71-97, February.
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