(Adkins & Paxson) Analytical Modelling for Sequential Investment Opportunites in Project Valuations.
- Roger Adkins* - Bradford University School of Management
- Dean Paxson** - Manchester Business School Submitted to Real Options Conference, Japan [26 January, 2013]
Israel Castillo Herrera - Python Modelling
Ingeniería Financiera. 2020.
A Pythond Modelling Implementation.
American perpetual compound options, not relying on bivariate or multivariate distribution function. This model is especially applicable for a real sequential investment opportunity, such as a series of drug development, tests and clinical trials, where the project can be cancelled at any time, and where the probability of failure declines over stages of completion.
The effect of changing input parameter values can clearly be seen in terms of resulting overall project process volatility, and the effective mark-up factor which justifies continuing with each investment stage.
This study appears to be a unique approach, which yields the threshold project value relative to investment costs that justifies investment at each stage, with no timing restrictions.
Keywords: Real Options Analysis, Multi-stage Multi-factor Sequential Investment, Perpetual Compound Option, Catastrophic Risk