“ Pricing and Financial Analysis of Investments using Real Options Technique”
SUMMARY OF PROPOSAL:
Investments in Business are earmarked by Innovation. More recently, investments in Business and information systems have been analyzed using the traditional methods of Net Present Value, Internal Rate of Return, and Economic Value Added etc. However, the recent developments in the field of pricing investments and innovation opportunities involve the application of real options and using evolutionary principles from Game Theory.
The proposed research aims to explore further the concepts of Game theory and derivatives like options , futures to examine the risk and analyze the investments in Business projects.
The option-game theory and methodology can bring the uncertainty and competition to one analytical frame work to evaluate project and make decision. The proposed research will also addresses the question of asymmetric information which is more relavent in today’s competitive environment. So, it is a more scientific modem investment decision- making method.
The research objectives are summarized as follows:
1. Review of existing literature. The main aim during this phase would be to go into more details of game theory and financial tools like options. In addition to identify the hurdles and drawbacks in use of options and game theory to assess investments.
2. Review and examination of traditional project investment decision methods, and points out their limitations and shortcomings, and then introduction of the newest development of modem investment decision-making theory and methodology: real options coupled with game theory.
3. Defining the concepts of investment of an enterprise and analyzing the influencing facts and option-game characteristics of enterprise's technology innovation investment decision-making. The...