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Liburkina L. M.

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The Method of Real Options as an Instrument to Evaluate Projects with High Uncertainty
Shestakov D. Y.

Shestakov, Dmytro Yu. (2019) “The Method of Real Options as an Instrument to Evaluate Projects with High Uncertainty.” Business Inform 2:102–108.
https://doi.org/10.32983/2222-4459-2019-2-102-108

Section: Innovative Processes

Article is written in Ukrainian
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UDC 336.7

Abstract:
The article analyzes the method of real options in terms of its ability to evaluate an investment project with a high level of uncertainty. The method of real options is compared with the classical approaches of project evaluation. The reasons for development of methods of evaluation of start-ups and innovative projects are described and substantiated. The advantages of the method of real options are highlighted by including in the evaluation of investor’s possibilities the implementation of managerial decisions in the process of creation of innovative products (project). The necessity of development of scientific and practical literature on evaluation of projects by means of complex options is substantiated. A three-year simple deferral option is described and evaluated for practical understanding of the financial advantages of the method of real options in making an investment decision, which results in the critical importance of correct investment solution at each stage of uncertainty scattering.

Keywords: real option, evaluation of projects, innovations, uncertainty.

Fig.: 4. Formulae: 4. Bibl.: 10.

Shestakov Dmytro Yu. – Postgraduate Student, Department of Finance, National University of Kyiv-Mohyla Academy (2 Skovorody Str., Kyiv, 04655, Ukraine)
Email: [email protected]

List of references in article

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[Legal Act of Ukraine] (2010). https://zakon.rada.gov.ua/laws/show/2755-17
[Legal Act of Ukraine] (2004). https://zakon1.rada.gov.ua/laws/show/v0361500-04
Ward, S., and Chapman, C. “Transforming Project Risk Management into Project Uncertainty Management“. Internal Journal of Project Management, vol. 21, no. 2 (2003): 97-105.
Van Putten, A., and MacMillan, I. “Making Real Options Really Work“. Harvard Business Review, vol. 82, no. 12 (2004): 134-141.
Triantis, A. “Realizing the Potential of Real Options: Does Theory Meet Practice“. Journal of Applied Corporate Finance, vol. 17, no. 2 (2005): 8-16.
Shestakov, D., Cobanoglu, C., and Corbaci, A. “Strategic Flexibility as a Key to Innovativeness: Theoretical Framework“. Advances in Global Business and Economics, vol. 1 (2018): 136-147.

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