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http://hdl.handle.net/10071/9568
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Title: A dynamic programming approach for evaluating a portfolio of R&D projects with a budget
Authors: Costa, A.
Paixão, J. P.
Keywords: Stochastic dynamic programming
Project evaluation
R&D project
Real options
Issue Date: 2014
Publisher: Scientific Online Publishing
Abstract: The Real Options approach has proved to be a suitable methodology for capturing the flexibility in the investment decision process. This is very useful for the financial evaluation of R&D projects where there are several possible decisions concerning to the investment – delaying, improving or abandoning. Since the risk of an R&D project is usually due to singular characteristics of the project and is uncorrelated with the financial markets, the contingent claims analysis may be not adequate to value R&D projects. Based on a dynamic programming evaluation model, presented in Huchzermeier and Loch [1], we propose an approach to valuing a portfolio of R&D projects with a budget. Specifically, considering a budget constraint, we make an extension of the model mentioned above for assessing the projects in the portfolio simultaneously. To test the proposed evaluation procedure, we generated several R&D portfolios with different dimensions and characteristics. According to our computational experience, the main conclusions are presented.
Peer reviewed: Sim
URI: https://ciencia.iscte-iul.pt/public/pub/id/19817
http://hdl.handle.net/10071/9568
ISSN: 2373-8472
Publisher version: The definitive version is available online at: http://dx.doi.org/10.15764/am.2014.02012
Appears in Collections:DMQGE-RI - Artigos em revistas internacionais com arbitragem científica

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