The enhanced milestone project valuation: The sequential compound option approach

Meng Yu Lee*, Fang Bo Yeh, An-Pin Chen

*Corresponding author for this work

Research output: Contribution to conferencePaper

Abstract

This paper proposes the Milestone Project Valuation (MPV) and enhanced MPV through sequential compound options (SCOs). Most compound options in literatures are 2-fold with constant parameters through time. The multi-fold compound options are just sequential compound CALL options. The multi-fold sequential compound options proposed in this study are compound option on (compound) option and allow call/put alteration. Besides, the parameters can vary in different folds and make the model more flexible. The partial derivative of multivariate normal integration is derived in this study and used for proofs of the SCO Greeks. The SCOs can enhance and broaden the usages of compound option in real option and financial derivative fields, such as the proposed MPV and enhanced MPV (eMPV) algorithm. These methods are concretized in a Graph User Interface (GUI) computer program.

Original languageEnglish
Pages4675-4699
Number of pages25
StatePublished - 1 Dec 2006
Event36th International Conference on Computers and Industrial Engineering, ICC and IE 2006 - Taipei, Taiwan
Duration: 20 Jun 200623 Jun 2006

Conference

Conference36th International Conference on Computers and Industrial Engineering, ICC and IE 2006
CountryTaiwan
CityTaipei
Period20/06/0623/06/06

Keywords

  • Milestone
  • Project valuation
  • Real option
  • Sequential compound option

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  • Cite this

    Lee, M. Y., Yeh, F. B., & Chen, A-P. (2006). The enhanced milestone project valuation: The sequential compound option approach. 4675-4699. Paper presented at 36th International Conference on Computers and Industrial Engineering, ICC and IE 2006, Taipei, Taiwan.