THE NATURE OF OPTION INTERACTIONS AND THE VALUATION OF INVESTMENTS WITH MULTIPLE REAL OPTIONS

被引:235
作者
TRIGEORGIS, L
机构
[1] School of Management, Boston University, Boston
关键词
D O I
10.2307/2331148
中图分类号
F8 [财政、金融];
学科分类号
0202 ;
摘要
This paper deals with the nature of option interactions and the valuation of capital budgeting projects possessing flexibility in the form of multiple real options. It identifies situations where option interactions can be small or large, negative or positive. Interactions generally depend on the type, separation, degree of being ''in the money,'' and the order of the options involved. The paper illustrates, through a generic example, the importance of properly accounting for interactions among the options to defer, abandon, contract or expand investment, and switch use. It is shown that the incremental value of an additional option, in the presence of other options. is generally less than its value in isolation, and declines as more options are present. Therefore, valuation errors from ignoring a particular option may be small. However. configurations of real options exhibiting precisely the opposite behavior are identified. Comparative statics results confirm that the value of flexibility, despite interactions. manifests familiar option properties.
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页码:1 / 20
页数:20
相关论文
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