Managing and Using Information Systems: A Strategic Approach
Managing and Using Information Systems: A Strategic Approach
Strategic Planning for Information Systems
Strategic Planning for Information Systems
A Case for Using Real Options Pricing Analysis to Evaluate Information Technology Project Investment
Information Systems Research
Quantitative Approaches for Assessing the Value of COTS-Centric Development
METRICS '99 Proceedings of the 6th International Symposium on Software Metrics
Information Technology for Management: Transforming Organizations in the Digital Economy
Information Technology for Management: Transforming Organizations in the Digital Economy
Prioritizing a Portfolio of Information Technology Investment Projects
Journal of Management Information Systems
Managing Information Technology Investment Risk: A Real Options Perspective
Journal of Management Information Systems
Journal of Management Information Systems
Journal of Management Information Systems
A compound real option and AHP methodology for evaluating ICT business alternatives
Telematics and Informatics
Investments in Information Security: A Real Options Perspective with Bayesian Postaudit
Journal of Management Information Systems
A multi-criteria game theory and real-options model for irreversible ICT investment decisions
Telecommunications Policy
IT project portfolio optimization: a risk management approach to software development governance
IBM Journal of Research and Development
Should We Go Our Own Way? Backsourcing Flexibility in IT Services Contracts
Journal of Management Information Systems
Resolving uncertainty and creating value from the exercise of e-commerce investment options
Information Systems Journal
International Journal of Business Data Communications and Networking
The effect of synergy enhancement on information technology portfolio selection
Information Technology and Management
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As real options analysis (ROA) is being applied to increasingly complex information technology (IT) investment problems, a concern arises over the use of heuristic ROA models that are simpler to apply but can produce overvaluations. A good example is the application of a heuristic nested variation of the Black-Scholes (BS) model to the evaluation of interrelated IT investments as nested options. This particular heuristic BS model could overvalue by more than 100 percent. Using a binomial model that is custom-tailored to a generic IT investment embedding nested options as the "baseline," we identify conditions under which the degree of overvaluation of this heuristic BS model is severe and unpredictable. Moreover, upon examining the structure of the custom-tailored binomial model, we identify the reason for overvaluation and derive a more accurate nested variation of the BS model. These findings should serve as a cautionary message about the use of untested heuristic ROA models.