Valuation of Real Options as Competitive Prototyping in System Development
Angelis, Diana I.
Ford, David N.
Dillard, John T.
MetadataShow full item record
A Real Options Valuation Model is developed to recommend how to valuate technology when benefits cannot be measured in monetary value. Expected values of effectiveness are used to select the preferred alternative. The methodology is illustrated using three guidance system technologies in the Army’s Javelin program. The strategy created multiple real options that gave the Army the right (without the obligation) to select one guidance system technology based on the outcome of technology development tests. Results indicate the Army paid less than the total value of the options, but could have increased net savings by paying different amounts to test each alternative. The analysis method provides a logical and defendable approach to the analysis of alternatives under technology development uncertainty.
RightsThis publication is a work of the U.S. Government as defined in Title 17, United States Code, Section 101. Copyright protection is not available for this work in the United States.
Showing items related by title, author, creator and subject.
Giachetti, Ronald E. (Monterey, California. Naval Postgraduate School, 2014-03-18); NPS-AM-14-015; NPS-AM-14-015This research addresses the problem of how to (1) value architectural options that deliver capabilities to the warfighter not inherently measured in dollar values and (2) conduct a trade study of architectural options, the ...
Johnson, Bonnie W. (Monterey, California: Naval Postgraduate SchoolMonterey, California. Naval Postgraduate School, 2019-12); NPS-19-N019-BNaval tactical operations could take a significant leap in progress with the aid of a real-time automated predictive analytics capability that provides predictions of second and third order effects of possible courses of ...
Real options in defense R&D: a decision tree analysis approach for options to defer, abandon, and expand Celiktas, Mehmet (Monterey, California: Naval Postgraduate School, 2016-12);The purpose of this thesis is to demonstrate the benefits of using real options in defense research and development (R&D) projects. To this end, the primary research question, how can real options be used in defense R&D?, ...