Table of Contents Author Guidelines Submit a Manuscript
Advances in Decision Sciences
Volume 2016 (2016), Article ID 7605909, 12 pages
http://dx.doi.org/10.1155/2016/7605909
Research Article

Assessing the Option to Abandon an Investment Project by the Binomial Options Pricing Model

Departamento de Economía y Empresa, Universidad de Almería, La Cañada de San Urbano, s/n, 04120 Almería, Spain

Received 20 September 2015; Revised 16 December 2015; Accepted 17 January 2016

Academic Editor: Kwai S. Chin

Copyright © 2016 Salvador Cruz Rambaud and Ana María Sánchez Pérez. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Linked References

  1. S. C. Myers, “Determinants of corporate borrowing,” Journal of Financial Economics, vol. 5, no. 2, pp. 147–175, 1977. View at Publisher · View at Google Scholar · View at Scopus
  2. A. M. Calle Fernández and V. M. Tamayo Bustamante, “Decisiones de inversión a través de opciones reales,” Estudios Gerenciales, vol. 25, no. 111, pp. 107–126, 2009. View at Publisher · View at Google Scholar
  3. A. K. Dixit and R. S. Pindyck, “The options approach to capital investment,” Harvard Business Review, vol. 73, pp. 105–115, 1995. View at Google Scholar
  4. W. C. Kester, “Today's options for tomorrow's growth,” Harvard Business Review, no. 62, pp. 153–160, 1984. View at Google Scholar
  5. T. Luehrman, “Investment opportunities as real options: get started with the numbers,” Harvard Business Review, vol. 4, pp. 51–67, 1998. View at Google Scholar
  6. M. Gallardo and A. Andalaft, “Análisis de la incorporación de flexibilidad en la evaluación de proyectos de inversión utilizando opciones reales y descuento de flujos dinámico,” Horizontes Empresariales, vol. 7, no. 1, pp. 41–56, 2008. View at Google Scholar
  7. P. Lamothe Fernández and M. Pérez Somalo, Opciones Financieras y Productos Estructurados, McGraw-Hill, Madrid, Spain, 2nd edition, 2003.
  8. S. Lee, B. Lee, J. Kim, and J. Kim, “A financing model to solve financial barriers for implementing green building projects,” The Scientific World Journal, vol. 2013, Article ID 240394, 10 pages, 2013. View at Publisher · View at Google Scholar · View at Scopus
  9. L. Santos, I. Soares, C. Mendes, and P. Ferreira, “Real options versus traditional methods to assess renewable energy projects,” Renewable Energy, vol. 68, pp. 588–594, 2014. View at Publisher · View at Google Scholar · View at Scopus
  10. C. Bérard and M. Perez, “Alliance dynamics through real options: the case of an alliance between competing pharmaceutical companies,” European Management Journal, vol. 32, no. 2, pp. 337–349, 2014. View at Publisher · View at Google Scholar · View at Scopus
  11. T. Driouchi and D. J. Bennett, “Real options in management and organizational strategy: a review of decision-making and performance implications,” International Journal of Management Reviews, vol. 14, no. 1, pp. 39–62, 2012. View at Publisher · View at Google Scholar · View at Scopus
  12. A. Horn, F. Kjærland, P. Molnár, and B. W. Steen, “The use of real option theory in Scandinavia's largest companies,” International Review of Financial Analysis, vol. 41, pp. 74–81, 2015. View at Publisher · View at Google Scholar
  13. D. Allenotor and R. K. Thulasiram, “A discrete time financial option pricing model for cloud services,” in Proceedings of the IEEE 11th International Conference on Autonomic and Trusted Computing, and IEEE 14th International Conference on Scalable Computing and Communications and Its Associated Workshops, Ubiquitous Intelligence and Computing (UTC-ATC-ScalCom '14), pp. 629–636, Bali, Indonesia, December 2014. View at Publisher · View at Google Scholar
  14. J. Shen and F. Pretorius, “Binomial option pricing models for real estate development,” Journal of Property Investment & Finance, vol. 31, no. 5, pp. 418–440, 2013. View at Publisher · View at Google Scholar · View at Scopus
  15. F. Black and M. Scholes, “The pricing of options and corporate liabilities,” Journal of Political Economy, vol. 81, no. 3, pp. 637–654, 1973. View at Publisher · View at Google Scholar
  16. R. Merton, “The theory of rational options pricing,” The Bell Journal of Economics and Management Science, vol. 1, no. 4, pp. 141–183, 1973. View at Google Scholar
  17. J. C. Cox, S. A. Ross, and M. Rubinstein, “Option pricing: a simplified approach,” Journal of Financial Economics, vol. 7, no. 3, pp. 229–263, 1979. View at Publisher · View at Google Scholar · View at Scopus
  18. M. Rubinstein, “Implied binomial trees,” The Journal of Finance, vol. 49, no. 3, pp. 771–818, 1994. View at Publisher · View at Google Scholar
  19. J. E. Smith and R. F. Nau, “Valuing risky projects: option pricing theory and decision analysis,” Management Science, vol. 41, no. 5, pp. 795–816, 1995. View at Publisher · View at Google Scholar
  20. L. E. Brandão, J. S. Dyer, and W. J. Hahn, “Using binomial decision trees to solve real-option valuation problems,” Decision Analysis, vol. 2, no. 2, pp. 69–88, 2005. View at Publisher · View at Google Scholar
  21. J. E. Smith, “Alternative approach for solving real options problems,” Decision Analysis, vol. 2, no. 2, pp. 89–102, 2005. View at Publisher · View at Google Scholar
  22. Y. G. Xue and M. L. Zhang, “Valuing research investment projects based on discrete time model: a real options approach,” Advanced Materials Research, vol. 926–930, pp. 4073–4076, 2014. View at Publisher · View at Google Scholar · View at Scopus
  23. H. Xiaoping and J. Cao, “Randomized binomial tree and pricing of American-style options,” Mathematical Problems in Engineering, vol. 2014, Article ID 291737, 6 pages, 2014. View at Publisher · View at Google Scholar · View at MathSciNet · View at Scopus
  24. A. Damodaran, Investment Valuation: Tools and Techniques for Determining the Value of any Asset, Wiley Finance Publishers, New York, NY, USA, 2nd edition, 2002.
  25. J. Mascareñas, “Opciones reales: valoración por el método binomial,” in Monografías sobre Finanzas Corporativas, Universidad Complutense de Madrid, Madrid, Spain, 2011. View at Google Scholar
  26. N. L. Damaraju, J. B. Barney, and A. K. Makhija, “Real options in divestment alternatives,” Strategic Management Journal, vol. 36, no. 5, pp. 728–744, 2015. View at Publisher · View at Google Scholar · View at Scopus
  27. J. Mascareñas, “Opciones reales en la valoración de proyectos de inversión,” in Monografías sobre Finanzas Corporativas, Universidad Complutense de Madrid, Madrid, Spain, 2007. View at Google Scholar
  28. T. Compernolle, S. Van Passel, K. Huisman, and P. Kort, “The option to abandon: stimulating innovative groundwater remediation technologies characterized by technological uncertainty,” Science of the Total Environment, vol. 496, pp. 63–74, 2014. View at Publisher · View at Google Scholar · View at Scopus
  29. J. Mascareñas and M. Leporati, “Opciones reales y flujo de caja descontado: ¿cuándo utilizarlos?” Nota Técnica 10, Fundació Privada Institut d'Estudis Financers, 2010. View at Google Scholar
  30. J. Mascareñas, “Opción real de abandonar un proyecto de inversión,” in Monografías Sobre Finanzas Corporativas, Universidad Complutense de Madrid, Madrid, Spain, 2014. View at Google Scholar
  31. H. Smith and L. Trigeorgis, Strategic Investment: Real Options and Games, Princeton University Press, Princeton, NJ, USA, 1st edition, 2004.
  32. M. J. Gordon and E. Shapiro, “Capital equipment analysis: the required rate of profit,” Management Science, vol. 3, no. 1, pp. 102–110, 1956. View at Publisher · View at Google Scholar
  33. T. Copeland, T. Koller, and J. Murrin, Valuation: Measuring and Managing the Value of Companies, John Wiley & Sons, New York, NY, USA, 3rd edition, 2000.