Valuing new random genetically modified (GM) traits with real options

William Wilson, Sumadhur Shakya and Bruce Dahl

Agricultural Finance Review, 2015, vol. 75, issue 2, 213-229

Abstract: Purpose - – The purpose of this paper is to develop an analytical model to value traits at different developmental phases and to determine the value of drought tolerance (DT) in wheat using GM technology. Design/methodology/approach - – A stochastic binomial real-options model of GM traits was developed to estimate the value of a DT wheat trait. Findings - – The results indicate that the value of DT wheat using GM technology is in-the-money at each development phase. The greatest value would accrue for the Prairie Gateway and Northern Great Plains regions in the USA. Research limitations/implications - – The approach is useful for valuing high-cost risky investments in technology and results provide guidance for development strategies. Originality/value - – The model is original and its applications to wheat are unique.

Keywords: Wheat; Drought tolerant; Random; Genetically modified; Real options; Trait valuation; Stochastic efficiency (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:afrpps:v:75:y:2015:i:2:p:213-229

DOI: 10.1108/AFR-05-2014-0014

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