Valuing modularity as a real option

Andrea Gamba and Nicola Fusari
Additional contact information
Nicola Fusari: University of Lugano and Swiss Finance Institute

No 08-20, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We provide a general valuation approach for capital budgeting decisions involving the modularization of a system. Within the framework developed by Baldwin and Clark (2000), we implement an approach using a numerical procedure based on the Least Squares Monte Carlo method proposed by Longstaff and Schwartz (2001). The approach is accurate, general and flexible.

Keywords: Real options; Modularity; Least Squares Monte Carlo (search for similar items in EconPapers)
JEL-codes: G12 G3 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2008-01
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Valuing Modularity as a Real Option (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp0820

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