Journal ArticleDOI
A note on project risk and option values of investments in information technologies
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This paper examines the relationship between project risk and option values of investments in new information technologies and illustrates how this relationship is significantly different from well-known results in the case of financial option pricing.Abstract:
Justification of investments in information technologies is an important research topic in the information systems area. Several approaches have been proposed. One of these highlights the deficiencies of traditional economic justification based on net present value, and proposes the use of techniques based on financial option pricing theory. This paper examines the relationship between project risk and option values of investments in new information technologies and illustrates how this relationship is significantly different from well-known results in the case of financial option pricing. Conditions for determining the desirability of risky projects are derived.read more
Citations
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A Case for Using Real Options Pricing Analysis to Evaluate Information Technology Project Investment
TL;DR: This paper presents the first application of the Black-Scholes model that uses a real world business situation involving IT as its test bed, and makes the case for the generalizability of the approach it discusses to four IT investment settings.
Journal ArticleDOI
Real Options and IT Platform Adoption: Implications for Theory and Practice
TL;DR: A model of the determinants of option value associated with investments in innovative IT platforms is developed, addressing a central question in the innovation field: When should a firm take a lead role in innovation with emerging technologies.
Journal ArticleDOI
IT value: the great divide between qualitative and quantitative and individual and organizational measures
TL;DR: A comprehensive review was conducted of IT value articles in the Communications of the ACM, Information Systems Research, Journal of Management Information Systems, and MIS Quarterly from 1993 to 1998, revealing a schism between the use of organization-level measures and other measures.
Journal ArticleDOI
Analysing information systems evaluation: another look at an old problem
Steve Smithson,Rudy Hirschheim +1 more
TL;DR: This paper re-examines information systems evaluation in light of recent developments in the field and begins with an example of a commo-based evaluation system.
Journal ArticleDOI
Justifying electronic banking network expansion using real options analysis
TL;DR: The research employs a version of the Black-Scholes option pricing model that is adjusted for risk-averse investors, showing how it is possible to obtain reliable values for Yankee 24's "investment timing option," even in the absence of a market to price it.
References
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Journal ArticleDOI
The Pricing of Options and Corporate Liabilities
Fischer Black,Myron S. Scholes +1 more
TL;DR: In this paper, a theoretical valuation formula for options is derived, based on the assumption that options are correctly priced in the market and it should not be possible to make sure profits by creating portfolios of long and short positions in options and their underlying stocks.
Book
Theory of rational option pricing
TL;DR: In this paper, the authors deduced a set of restrictions on option pricing formulas from the assumption that investors prefer more to less, which are necessary conditions for a formula to be consistent with a rational pricing theory.
Journal ArticleDOI
The value of an option to exchange one asset for another
TL;DR: In this article, the authors developed an equation for the value of the option to exchange one risky asset for another: the investment adviser's performance incentive fee, the general margin account, the exchange offer, and the standby commitment.
Journal ArticleDOI
Justifying investments in new information technologies
TL;DR: In this paper, an alternative approach to valuing new IT investments is presented, which is based on intuition rather than hard evidence, and it is shown that a major portion of the value of new IT projects accrues from future projects that use the technology.