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Relations Between the Use of Modern Technology and the Financial Results of the Financial Service Sector in Poland Read chapter Read first chapter

2019 | OriginalPaper | Chapter

Financial Valuation of Production Diversification in the Steel Industry Using Real Option Theory

Authors : Bogdan Rębiasz, Bartłomiej Gaweł, Iwona Skalna

Published in: Information Systems Architecture and Technology: Proceedings of 39th International Conference on Information Systems Architecture and Technology – ISAT 2018

Publisher: Springer International Publishing

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Abstract

Steel industry is subject to significant volatility in its output prices and market demands for different ranges of products. Therefore, it is common practice to invest in various assets, which gives the opportunity to diversify production and generate valuable switch options. This article investigates the incremental benefit of product switch options in steel plant projects. The options are valued using Monte Carlo simulation and modeling the prices of and demand for steel products as Geometric Brownian Motion (GBM). Our results show that the product switch option can generate a significant increase in the net present value (NPV) of metallurgical projects.

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Metadata
Title
Financial Valuation of Production Diversification in the Steel Industry Using Real Option Theory
Authors
Bogdan Rębiasz
Bartłomiej Gaweł
Iwona Skalna
Copyright Year
2019
Book
Information Systems Architecture and Technology: Proceedings of 39th International Conference on Information Systems Architecture and Technology – ISAT 2018

Print ISBN: 978-3-319-99992-0

Electronic ISBN: 978-3-319-99993-7

Copyright Year: 2019

DOI
https://doi.org/10.1007/978-3-319-99993-7_29

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