A granularity approach to compound real option in multi-stage capital investment project

Cong Li, Junzo Watada, Huiming Zhang

    Research output: Contribution to journalArticle

    1 Citation (Scopus)

    Abstract

    Capital investment plays a pivotal role in making a company win in a market. In the real world, capital investment is a gradual behaviour, which means that a capital investment project can be divided into multiple stages that can effectively reduce the risks of the investment project. Because the future movement of the market is influenced by various uncertain factors, companies cope with such uncertainties in an effective and timely manner via decision-making using continuously developing and robust tools. The objective of this research is to propose a method that satisfies the requirements of companies. Real option analysis is a relatively new and insightful way to evaluate corporate investment decisions. When undertaking new investments, firms may have options to invest in stages. Moreover, decision-makers often face the situation of having incomplete information. To handle this situation and address problems under uncertain circumstances in the research, a granularity approach is introduced that includes fuzzy variables and credibility theory. In the granularity approach, uncertainty such as fuzzy numbers is taken as a granule, which enables us to take fuzzy numbers not only for uncertain values but also for decision values in a group.

    Original languageEnglish
    Pages (from-to)331-341
    Number of pages11
    JournalIntelligent Decision Technologies
    Volume9
    Issue number4
    DOIs
    Publication statusPublished - 2015 Dec 23

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    Industry
    Decision making
    Uncertainty

    Keywords

    • capital investment
    • Compound real option
    • credibility
    • fuzzy variable
    • granularity
    • uncertainty

    ASJC Scopus subject areas

    • Artificial Intelligence
    • Human-Computer Interaction
    • Computer Vision and Pattern Recognition
    • Software

    Cite this

    A granularity approach to compound real option in multi-stage capital investment project. / Li, Cong; Watada, Junzo; Zhang, Huiming.

    In: Intelligent Decision Technologies, Vol. 9, No. 4, 23.12.2015, p. 331-341.

    Research output: Contribution to journalArticle

    Li, Cong ; Watada, Junzo ; Zhang, Huiming. / A granularity approach to compound real option in multi-stage capital investment project. In: Intelligent Decision Technologies. 2015 ; Vol. 9, No. 4. pp. 331-341.
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