Multi-stage evaluation of R&D IT projects - Based on compound options

X. Y. Liu; W. G. Fang; F. J. Wei

Multi-stage evaluation of R&D IT projects - Based on compound options

X. Y. Liu^*
, W. G. Fang
, F. J. Wei

^*Corresponding author for this work

School of Economics and Management

Beihang University

Research output: Chapter in Book/Report/Conference proceeding › Conference contribution › peer-review

1 Scopus citations

Abstract

Considering the characteristics of IT R&D, this paper introduced the concept of compound options into the evaluation of IT R&D investment, and proposed a compound options approach to evaluate multi-stage investment. This paper divided R&D project into three stages, including pre-experiment, large-scale research and commercialization. The options comprised in these three stages were viewed as compound options to be priced and evaluated. Referring to different features of these three stages, three approaches, i.e., binomial decision tree of single option, binomial decision tree of multi-stage options, and modified B-S model with a risk-averting investor, were set up to evaluate the values of these three stages respectively. Moreover, a systematic pricing model which is easy to operate on practical evaluation of IT R&D investment options was discussed. Finally an example of the value evaluation for an IT R&D investment project was given to demonstrate the application.

Original language	English
Title of host publication	Frontiers in Enterprise Integration Xian International Symposium, IFISF and IFIP TC 8.9 International Conference on Research and Practical Issues of Enterprise Information Systems, CONFENIS 2007
Pages	413-419
Number of pages	7
State	Published - 2008
Event	1st International Forum of Information Systems Frontiers, IFISF and 2nd IFIP TC8.9 International Conference on Research and Practical Issues of Enterprise Information Systems, CONFENIS 2007 - Beijing, China Duration: 14 Oct 2007 → 16 Oct 2007

Publication series

Name	Frontiers in Enterprise Integration Xian International Symposium, IFISF and IFIP TC 8.9 International Conference on Research and Practical Issues of Enterprise Information Systems, CONFENIS 2007

Conference

Conference	1st International Forum of Information Systems Frontiers, IFISF and 2nd IFIP TC8.9 International Conference on Research and Practical Issues of Enterprise Information Systems, CONFENIS 2007
Country/Territory	China
City	Beijing
Period	14/10/07 → 16/10/07

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 9 Industry, Innovation, and Infrastructure

Keywords

Binomial tree
Compound options
IT
Multi-stage evaluation
R&D
Real options

Cite this

Liu, X. Y., Fang, W. G., & Wei, F. J. (2008). Multi-stage evaluation of R&D IT projects - Based on compound options. In Frontiers in Enterprise Integration Xian International Symposium, IFISF and IFIP TC 8.9 International Conference on Research and Practical Issues of Enterprise Information Systems, CONFENIS 2007 (pp. 413-419). (Frontiers in Enterprise Integration Xian International Symposium, IFISF and IFIP TC 8.9 International Conference on Research and Practical Issues of Enterprise Information Systems, CONFENIS 2007).

Liu, X. Y. ; Fang, W. G. ; Wei, F. J. / Multi-stage evaluation of R&D IT projects - Based on compound options. Frontiers in Enterprise Integration Xian International Symposium, IFISF and IFIP TC 8.9 International Conference on Research and Practical Issues of Enterprise Information Systems, CONFENIS 2007. 2008. pp. 413-419 (Frontiers in Enterprise Integration Xian International Symposium, IFISF and IFIP TC 8.9 International Conference on Research and Practical Issues of Enterprise Information Systems, CONFENIS 2007).

@inproceedings{6105e7e0b388406ba1be3332298bd727,

title = "Multi-stage evaluation of R\&D IT projects - Based on compound options",

abstract = "Considering the characteristics of IT R\&D, this paper introduced the concept of compound options into the evaluation of IT R\&D investment, and proposed a compound options approach to evaluate multi-stage investment. This paper divided R\&D project into three stages, including pre-experiment, large-scale research and commercialization. The options comprised in these three stages were viewed as compound options to be priced and evaluated. Referring to different features of these three stages, three approaches, i.e., binomial decision tree of single option, binomial decision tree of multi-stage options, and modified B-S model with a risk-averting investor, were set up to evaluate the values of these three stages respectively. Moreover, a systematic pricing model which is easy to operate on practical evaluation of IT R\&D investment options was discussed. Finally an example of the value evaluation for an IT R\&D investment project was given to demonstrate the application.",

keywords = "Binomial tree, Compound options, IT, Multi-stage evaluation, R\&D, Real options",

author = "Liu, \{X. Y.\} and Fang, \{W. G.\} and Wei, \{F. J.\}",

year = "2008",

language = "英语",

isbn = "9780415457798",

series = "Frontiers in Enterprise Integration Xian International Symposium, IFISF and IFIP TC 8.9 International Conference on Research and Practical Issues of Enterprise Information Systems, CONFENIS 2007",

pages = "413--419",

booktitle = "Frontiers in Enterprise Integration Xian International Symposium, IFISF and IFIP TC 8.9 International Conference on Research and Practical Issues of Enterprise Information Systems, CONFENIS 2007",

note = "1st International Forum of Information Systems Frontiers, IFISF and 2nd IFIP TC8.9 International Conference on Research and Practical Issues of Enterprise Information Systems, CONFENIS 2007 ; Conference date: 14-10-2007 Through 16-10-2007",

}

Liu, XY, Fang, WG & Wei, FJ 2008, Multi-stage evaluation of R&D IT projects - Based on compound options. in Frontiers in Enterprise Integration Xian International Symposium, IFISF and IFIP TC 8.9 International Conference on Research and Practical Issues of Enterprise Information Systems, CONFENIS 2007. Frontiers in Enterprise Integration Xian International Symposium, IFISF and IFIP TC 8.9 International Conference on Research and Practical Issues of Enterprise Information Systems, CONFENIS 2007, pp. 413-419, 1st International Forum of Information Systems Frontiers, IFISF and 2nd IFIP TC8.9 International Conference on Research and Practical Issues of Enterprise Information Systems, CONFENIS 2007, Beijing, China, 14/10/07.

Multi-stage evaluation of R&D IT projects - Based on compound options. / Liu, X. Y.; Fang, W. G.; Wei, F. J.
Frontiers in Enterprise Integration Xian International Symposium, IFISF and IFIP TC 8.9 International Conference on Research and Practical Issues of Enterprise Information Systems, CONFENIS 2007. 2008. p. 413-419 (Frontiers in Enterprise Integration Xian International Symposium, IFISF and IFIP TC 8.9 International Conference on Research and Practical Issues of Enterprise Information Systems, CONFENIS 2007).

Research output: Chapter in Book/Report/Conference proceeding › Conference contribution › peer-review

TY - GEN

T1 - Multi-stage evaluation of R&D IT projects - Based on compound options

AU - Liu, X. Y.

AU - Fang, W. G.

AU - Wei, F. J.

PY - 2008

Y1 - 2008

N2 - Considering the characteristics of IT R&D, this paper introduced the concept of compound options into the evaluation of IT R&D investment, and proposed a compound options approach to evaluate multi-stage investment. This paper divided R&D project into three stages, including pre-experiment, large-scale research and commercialization. The options comprised in these three stages were viewed as compound options to be priced and evaluated. Referring to different features of these three stages, three approaches, i.e., binomial decision tree of single option, binomial decision tree of multi-stage options, and modified B-S model with a risk-averting investor, were set up to evaluate the values of these three stages respectively. Moreover, a systematic pricing model which is easy to operate on practical evaluation of IT R&D investment options was discussed. Finally an example of the value evaluation for an IT R&D investment project was given to demonstrate the application.

AB - Considering the characteristics of IT R&D, this paper introduced the concept of compound options into the evaluation of IT R&D investment, and proposed a compound options approach to evaluate multi-stage investment. This paper divided R&D project into three stages, including pre-experiment, large-scale research and commercialization. The options comprised in these three stages were viewed as compound options to be priced and evaluated. Referring to different features of these three stages, three approaches, i.e., binomial decision tree of single option, binomial decision tree of multi-stage options, and modified B-S model with a risk-averting investor, were set up to evaluate the values of these three stages respectively. Moreover, a systematic pricing model which is easy to operate on practical evaluation of IT R&D investment options was discussed. Finally an example of the value evaluation for an IT R&D investment project was given to demonstrate the application.

KW - Binomial tree

KW - Compound options

KW - IT

KW - Multi-stage evaluation

KW - R&D

KW - Real options

UR - https://www.scopus.com/pages/publications/84863237283

M3 - 会议稿件

AN - SCOPUS:84863237283

SN - 9780415457798

T3 - Frontiers in Enterprise Integration Xian International Symposium, IFISF and IFIP TC 8.9 International Conference on Research and Practical Issues of Enterprise Information Systems, CONFENIS 2007

SP - 413

EP - 419

BT - Frontiers in Enterprise Integration Xian International Symposium, IFISF and IFIP TC 8.9 International Conference on Research and Practical Issues of Enterprise Information Systems, CONFENIS 2007

T2 - 1st International Forum of Information Systems Frontiers, IFISF and 2nd IFIP TC8.9 International Conference on Research and Practical Issues of Enterprise Information Systems, CONFENIS 2007

Y2 - 14 October 2007 through 16 October 2007

ER -

Liu XY, Fang WG, Wei FJ. Multi-stage evaluation of R&D IT projects - Based on compound options. In Frontiers in Enterprise Integration Xian International Symposium, IFISF and IFIP TC 8.9 International Conference on Research and Practical Issues of Enterprise Information Systems, CONFENIS 2007. 2008. p. 413-419. (Frontiers in Enterprise Integration Xian International Symposium, IFISF and IFIP TC 8.9 International Conference on Research and Practical Issues of Enterprise Information Systems, CONFENIS 2007).

Multi-stage evaluation of R&D IT projects - Based on compound options

Abstract

Publication series

Conference

UN SDGs

Keywords

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Cite this