Reconsideration of Valuation in Software Markets

Part of the Contributions to Management Science book series (MANAGEMENT SC.)


The previous analysis outlined the challenge of precise valuation in dynamic software markets. In this chapter, various valuation approaches are compared with the requirements for valuation in software markets. According to this comparison, the real option approach is perfectly suited as it best accounts for the uncertainties and flexibilities in software markets. Since the real option approach can be implemented by various option pricing models, possible alternatives are matched with the requirements for valuation in software markets. As numerical simulations are identified as the preferential method, the modeling of the respective input parameters is investigated. Volatility and price of the underlying are identified as particularly important and challenging parameters. Hence, they are analyzed in the following part.


Cash Flow Option Price Real Option Implied Volatility American Option 
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Copyright information

© Springer-Verlag Berlin Heidelberg 2010

Authors and Affiliations

  1. 1.FrankfurtGermany

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