Real Option Modeling for Valuing Worker Flexibility
نویسندگان
چکیده
We propose using a real options framework to quantify the financial value of cross training. We model the investment decision in cross training as a series of European call options with the same exercise price but with different maturity dates. We use the Black-Scholes formula and the binomial tree approach to find the value of having the option to cross train. A case study shows the application of our proposed model to value the option of cross training in an environment where the price of the product is stochastic. We also demonstrate the advantage of using the option valuation method as opposed to the traditional discounted cash flow analysis to quantify the value of cross training.
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