International Journal of Business and Social Science

ISSN 2219-1933 (Print), 2219-6021 (Online) DOI: 10.30845/ijbss

Modified Real Options Valuation for Developing Product-Type Innovation Strategies
Yuriy V. Trifonov, Sergey N. Yashin, Egor V. Koshelev

Using the Black-Scholes Option Pricing Model (OPM) that has already become classical for evaluating the mar-ket value of a real option is problematic since it includes standard deviation of contractual revenue performance, which is impossible to predict accurately. In addition, the OPM is applicable to European options only. But we assume adequate flexibility of an option contract, which implies a possibility of early exercising the option. In this connection, there appears a task for developing and applying another model. In this quality, we suggest using a binomial option-pricing model that is modified for increased risk conditions.

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