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A real options design for product outsourcing
Conference proceeding

A real options design for product outsourcing

H B Nembhard, L U Shi and M Aktan
WSC'01: PROCEEDINGS OF THE 2001 WINTER SIMULATION CONFERENCE, VOLS 1 AND 2, pp.548-552
2001
DOI: 10.1109/WSC.2001.977337

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Abstract

We develop a financial model to assess the option value of outsourcing. We value the real options associated with outsourcing an item using Monte Carlo simulation. This valuation gives decision makers a way to choose the appropriate outsourcing strategy based on an integrated view of market dynamics. A simulation example is used to demonstrate the application of real options to value outsourcing. The simulation program code was written in JavaScript so that the valuation task would be accessible to other users because of its web enabled feature.

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