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Valuing Modularity as a Real Option
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Gamba, Andrea and Fusari, N. (2009) Valuing Modularity as a Real Option. Management Science, Vol.55 (No.11). pp. 1877-1896. doi:10.1287/mnsc.1090.1070 ISSN 0025-1909.
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Official URL: http://dx.doi.org/10.1287/mnsc.1090.1070
Abstract
We provide a general valuation approach for capital budgeting decisions involving the modularization in the design of a system. Within the framework developed by Baldwin and Clark (Baldwin, C. Y., K. B. Clark. 2000. Design Rules: The Power of Modularity. MIT Press, Cambridge, MA), we implement a valuation approach using a numerical procedure based on the least-squares Monte Carlo method proposed by Longstaff and Schwartz (Longstaff, F. A., E. S. Schwartz. 2001. Valuing American options by simulation: A simple least-squares approach. Rev. Financial Stud. 14(1) 113–147). The approach is accurate, general, and flexible.
Item Type: | Journal Article | ||||
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Subjects: | H Social Sciences > HG Finance | ||||
Divisions: | Faculty of Social Sciences > Warwick Business School > Finance Group Faculty of Social Sciences > Warwick Business School |
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Journal or Publication Title: | Management Science | ||||
Publisher: | Institute for Operations Research and the Management Sciences (I N F O R M S) | ||||
ISSN: | 0025-1909 | ||||
Official Date: | 2009 | ||||
Dates: |
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Volume: | Vol.55 | ||||
Number: | No.11 | ||||
Number of Pages: | 20 | ||||
Page Range: | pp. 1877-1896 | ||||
DOI: | 10.1287/mnsc.1090.1070 | ||||
Status: | Peer Reviewed | ||||
Publication Status: | Published | ||||
Access rights to Published version: | Restricted or Subscription Access |
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