Application of the Real Options Method for Innovation Project Investment Evaluation

Abstract

Innovations are regarded as one of the important sectors of the economy and investment in economically developed countries. The underdevelopment of organizationaleconomic forms and the insufficient development of mechanisms for supporting and implementing projects in innovations impede the development in this sphere. The article analyzes the different methods for calculating the value of options. The stages of decision-making support in the implementation of innovation projects that are based on real options method were analyzed. According to the results of the analysis, conclusion was made that when evaluating real innovative investments, Cox-Rubinstein's approach is more acceptable. The binominal model allows obtaining more accurate results and presents a decision tree with variants of branching, which allows visualizing the scenarios and probabilities of these solutions. Keywords-innovation project; project investment; real options method; binomial model; project efficiency evaluation I. *Fund: The reported study was supported by Russian Foundation for Basic Research, project "Development of economic and mathematical tools for managing and evaluating the effectiveness of innovative projects based on binomial models" (Project No.