A Dynamic-Programming, Real-Option Model for NPD That Incorporates Serial Correlations
Stuart School of Business research presentation by Assistant Professor of Analytics Andrew Kumiega, Associate Professor of Finance Benjamin E. Van Vliet, and Greg Sterijevski
Valuation of Innovation Projects Utilizing Dynamic Programming
- Assistant Professor of Analytics Andrew Kumiega
- Associate Professor of Finance Benjamin E. Van Vliet
- Greg Sterijevski, Ph.D., founder of CommodityVol.com
Abstract:
The main difference between business intelligence and innovation projects versus classical projects is the abandonment feature. We address the abandonment feature by extending dynamic programming methodology to option pricing. We also introduce the ability to model errors for innovation projects via serial error estimation. Finally, we link the concept of project controls as greeks of the real option via the concept of valuations for each state at each investment gate in the project.
All Illinois Tech faculty, students, and staff are invited to attend.
The Friday Research Presentations series showcases ongoing academic research projects conducted by Stuart School of Business faculty and students, as well as guest presentations by Illinois Tech colleagues, business professionals, and faculty from other leading business schools.
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