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Application of Real Options to Evaluate the Development Process of New Aircraft Models

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dc.contributor.author Miller, Bruno
dc.contributor.author Clarke, John-Paul
dc.date.accessioned 2006-12-08T21:38:09Z
dc.date.available 2006-12-08T21:38:09Z
dc.date.issued 2004
dc.identifier.uri http://hdl.handle.net/1721.1/34959
dc.description.abstract Investment decisions in the development and production of new aircraft models is difficult because of the technical and market uncertainties associated with such a complex process. The accompanying risks can be mitigated through a flexible approach that incorporates several decision points at different stages of the process. Therefore, as the project evolves, management will be able to diagnose its progress, compare it to previous expectations, and decide to continue or not. In this paper, we present a methodology to evaluate flexible business strategies that is based on real options analysis (ROA) and Monte Carlo simulation. This methodology takes into account the flexibility that managers have to affect the success of any given project and, therefore, it provides a better estimate of project value. Numerical results are given for a representative process based on actual aircraft manufacturer’s data. en
dc.format.extent 242421 bytes
dc.format.mimetype application/pdf
dc.publisher AIAA en
dc.relation.ispartofseries AIAA-2004-6498 en
dc.subject Airline Management and Operations en
dc.subject Economics en
dc.subject Air Transportation en
dc.title Application of Real Options to Evaluate the Development Process of New Aircraft Models en
dc.type Technical Report en
dc.identifier.citation 4th AIAA ATIO Forum, Chicago, Il. 2004 en


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