Financial decision-making: using information generated by a discrete event simulation to evaluate real options in a research and development environment

Authors:
Jerry Flatto;L. Leslie Gardner
Affiliations:
University of Indianapolis, Indianapolis, IN;University of Indianapolis, Indianapolis, IN
Venue:
Proceedings of the 32nd conference on Winter simulation
Year:
2000

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Abstract

This article examines how a discrete event simulation can be developed to evaluate the impact of real options on a research and development project. Previous work with real options has been primarily mathematically based and the approach was not transferable to actual projects. The results shown in this article indicate that simulation is a valid method to evaluate real options and that the real options do impact the net present value of a process.