Valuation of patents and R&D projects using real options: a practical implementation

Alvarez, Lucia and Blanco, Felipe and Ruiz López, Felipe and Solana Perez, Pablo (2008). Valuation of patents and R&D projects using real options: a practical implementation. "Direccion y Organizacion" (n. 35); pp. 125-130. ISSN 1132-175X.

Description

Title: Valuation of patents and R&D projects using real options: a practical implementation
Author/s:
  • Alvarez, Lucia
  • Blanco, Felipe
  • Ruiz López, Felipe
  • Solana Perez, Pablo
Item Type: Article
Título de Revista/Publicación: Direccion y Organizacion
Date: June 2008
ISSN: 1132-175X
Subjects:
Freetext Keywords: Real options, Monte Carlo, patents.
Faculty: E.T.S.I. Industriales (UPM)
Department: Ingeniería de Organización, Administración de Empresas y Estadística
Creative Commons Licenses: Recognition - No derivative works - Non commercial

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Abstract

The correct valuation of an R&D project is a rather complex process. Aside from the fact that it can take several years to launch a new product after extensive investment, there happens to be a significant abandonment probability at each of the development and exploitation stages. Significant uncertainty is also inherently attached to both development costs and subsequent operational cash flows (be it the case of receiving final approval for commercial purposes).These cash flows need to be estimated with anticipation in order to give a reasonable value for the patent or R&D project. The approach undertaken herein is to consider the patent or R&D project as a complex option on relevant underlying stochastic variables: investment costs and operational cash flows. A model is proposed, programmed and applied to a real case.

More information

Item ID: 2929
DC Identifier: http://oa.upm.es/2929/
OAI Identifier: oai:oa.upm.es:2929
Official URL: http://www.cepade.es/Ademas/RevistaAnteriores.asp
Deposited by: Memoria Investigacion
Deposited on: 29 Apr 2010 11:18
Last Modified: 24 Feb 2017 15:36
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