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Real Options In The Use Of Communication Technology Investments In Risk Management

Posted on:2004-10-07Degree:MasterType:Thesis
Country:ChinaCandidate:S J ManFull Text:PDF
GTID:2206360092985153Subject:Statistics
Abstract/Summary:PDF Full Text Request
Ever since the ages of Aristotle, which is so-called Holy Bible ages in history of economic thought, the earliest thought of risk management has turned up. Investment risk management efficiently came out to be the focus of the research in theory and practice. With the development of new high-technique which rolls up the world with an unprecedented astonishing speed, among which the particularly important is reform and application in telecommunication technology. It changes traditional life and working style of people, like a lubricant to the whole world. It increases the efficiency of production, and becomes more and more important in people's life. At the same time, accompanying with the rapid improvements in telecommunication technology, the telecommunication technology investment becomes more and more widespread and uncertain. To make full use of the uncertainty and maximize investment value on the basis of efficient management of risks. People turn their attention to some method of risk management. One of the most influencial is real options.A method of risk management based on multiple interacting real options is put forward in this thesis on the basis of Benaroch's (2001) method of risk management and Trigeogis'(1991) log-transformed binomial method. This method overcomes the shortcoming of NPV method for risk management of telecom corporation and increases management efficiency by considering the interaction of different real options. What's more important is the thesis applies it into PHS investment of Sichuan Telecom Company and uses a method of risk management based on multiple interacting real options. It is not also proves the method is available and efficient but also guides the risk management in the future. Additionally, this method may lead to the development of research and application of invest risk management. The author realizes oneshould do more study in the calculation of value contribution of the real option, combining that idea with game theory and more efficient and accurate method. This thesis is divided into four chapters, contents of each chapter is as the following:Chapter One -- IntroductionFrom the end of the 1970s and the beginning of the 1980s, there came a series of papers which gave a boost to the real options literature by focusing on valuing quantitatively -- in many cases, deriving analytic, closed-form solutions-- one type after another of a variety of real options, although each option was typically analyzed in isolation. The traditional risk managing method have many limitations for it doesn't match the characteristics of the investment in uncertain circumstance. Real option-based method revises the value of investment item by adding value of managerial flexibility afforded by embedded real options. This thesis tries to further investigate managing investment by using an option-based method.Chapter Two-Option-Based Method for Managing Technology Investment RiskWhat problems should be resolved when we use real option-based method in telecom company's investment risk management? They include: What operating options potentially embedded in a technology investment can and ought to be created in order to maximize the investment value? Three concepts should be recognized before we realize the option-based method: First, the key concept is that the specific real options used to beneficially structure an investment ought to be chosen based on the investment-specific risks that they can control. Another concept is that different risks and different real options arise at different stages in the investment lifecycle. The last concept is that real optionsanalysis is valuable only if it is intuitive and easy to apply. On recognizing the important concepts of real options, the main steps of real option-based investment risk management method include: (1)Define the investment and its risk profile. State the investment goals, requirements and assumptions (technological, organizational, economic, etc.), and then identify the risks present...
Keywords/Search Tags:Real Option, Operating Option, Technology Investment Risk Management, Telecommunication Corporation, PHS
PDF Full Text Request
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