Valuation of R&D projects of new energy vehicles based on generalized mixed sub-fractional Brownian motion under fuzzy environment

Weiting Zhang, Guitian He, Maokang Luo and Wenjie Liang

Applied Mathematics and Computation, 2025, vol. 507, issue C

Abstract: The industry and investors are closely monitoring the valuation of research and development (R&D) projects related to new energy vehicles (NEVs) as their technology advances rapidly. However, standard techniques of valuation often fail to describe the full value of R&D initiatives in an uncertain market environment, due to the significant technical hazards and uncertain results associated with these projects. To address this issue, this study creatively introduces a generalized mixed sub-fractional Brownian motion (GMSFBM) based valuation method for compound real options in the NEV R&D projects. In order to more accurately characterize the technical and financial risks at every stage of the R&D process, this paper combines stochastic processes with compound real option theory. Significantly, to derive the assessment model for NEV R&D projects, a fuzzy partial differential equation (FPDE) of the five-fold compound real option model is constructed using Itô's lemma. Moreover, asymmetric trapezoidal fuzzy parameters are also introduced by the valuation model to characterize the uncertainty of the NEV R&D projects. Finally, numerical experiments are conducted to validate the effectiveness and practicality of the GMSFBM model in the appraisement of the NEV R&D projects, providing new quantitative analysis tools and methods for project decision-making.

Keywords: Generalized mixed sub-fractional Brownian motion; NEV R&D valuation; Compound real option; Fuzzy numbers (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:apmaco:v:507:y:2025:i:c:s0096300325002851

DOI: 10.1016/j.amc.2025.129559

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