Valuation of Real Options as Competitive Prototyping in System Development
Loading...
Authors
Angelis, Diana I.
Ford, David N.
Dillard, John T.
Subjects
Real Options Valuation Model
Real Options Theory
Analysis of Alternatives
Technology Development
Javelin
Real Options Theory
Analysis of Alternatives
Technology Development
Javelin
Advisors
Date of Issue
2014-07
Date
July 2014
Publisher
Language
Abstract
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.
Type
Book Chapter
Description
Series/Report No
Department
Organization
Identifiers
NPS Report Number
Sponsors
Funder
Format
Citation
Defense ARJ, July 2014, Vol. 21, No. 3, pp. 668-692
Distribution Statement
Rights
This 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.