Journal article
A REAL OPTIONS DESIGN FOR QUALITY CONTROL CHARTS
The Engineering economist, Vol.47(1), pp.28-59
01/01/2002
DOI: 10.1080/00137910208965022
Abstract
We develop a financial model for a manufacturing process where quality can be affected by an assignable cause. We value the real options associated with applying a statistical process control chart using the Black-Scholes equation, binomial and pentanomial lattices, and Monte Carlo simulation methods. This valuation gives decision makers a way to choose the appropriate quality control strategy based on an integrated view of the market dynamics with the manufacturing operational aspects. An industry case is used to demonstrate the application of real options to value control chart decisions. Web based programs are given to value the alternatives in the case study, making the valuation task accessible to other users.
Details
- Title: Subtitle
- A REAL OPTIONS DESIGN FOR QUALITY CONTROL CHARTS
- Creators
- HARRIET BLACK Nembhard - University of Wisconsin–MadisonLEYUAN Shi - University of Wisconsin–MadisonMEHMET Aktan - Atatürk University
- Resource Type
- Journal article
- Publication Details
- The Engineering economist, Vol.47(1), pp.28-59
- Publisher
- Taylor & Francis Group
- DOI
- 10.1080/00137910208965022
- ISSN
- 0013-791X
- eISSN
- 1547-2701
- Language
- English
- Date published
- 01/01/2002
- Academic Unit
- Engineering Administration; Industrial and Systems Engineering
- Record Identifier
- 9984186956602771
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