Valuation of Options in R&D (Research and Development) (Report‪)‬

Abstract: In this article we apply an option approach to the R&D process and discus the issues that are of relevance for successful option valuation. We propose a model that combines qualitative and quantitative option valuation, which should improve the confidence of the results. The valuation should be precise enough to provide guidance for decision makers, and simple enough to be intuitive. In addition selected assumptions are discussed and some future research directions are suggested. Key words: real options, R&D, project evaluation, flexibility