Real Option Theory and
Application
to the Fishery Industry:
A survey of the literature[1]
Matteo
Ferraris
Università degli Studi di Milano, Milan, Italy
Dipartimento di Economia, Management e Metodi Quantitativi
DEMM
Via Conservatorio 7
20122 - Milano
Tel.: +39 02 50321049
email:
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Elena Pagliarino
National Research Council
of Italy
Institute for Economic
Research on Firm and Growth
CNR-CERIS
Collegio Carlo Alberto -
via Real Collegio, n. 30
10024 Moncalieri (Torino) – ITALY
Tel.:+ 39 011-6824.927
email:
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Abstract: This paper
would be a review of the literature of the main and innovative methodologies of
evaluation of real investments: the real option approach (ROA). In particular,
the aim of this work is to define an optimal methodology and to select the main
drivers that permit to make a more accurate evaluation of the investments in
the fishery market. ROA methodology comes from the need to overtake the
traditional theory of the net present value (NPV) and from the need for the
management of a fishery enterprise to adapt to the future market conditions and
to the competitive behavior in the changes of the fishery techniques.
ROA was born from the theory of Dixit & Pyndick
(1994) that started to use the models of the financial option theories in order
to evaluate investments in other sectors like oil, energy, ICT, manufacturing.
From a theoretical point of view, indeed, real investments are characterized by
“irreversibility” and “possibility of delay” since a manager can defer, expand,
abandon an initial project in different years of its own operational life. In
this context, despite of the financial option models ROA has a real investment
as underlying asset. If the enterprise decides to invest in a real investment
it means that the enterprise exercises an option and this decision is
irreversible. In the context of the Ritmare project, we would use the same
methodological approach by using the evaluation of the investments in the
fishery market. Our first step is to provide a review of the main papers that
focus on ROA in the fishery with some empirical applications. Finally, we also
try to underline the main drivers or variables of the literature that permits
to use the ROA and to present a possible scheme of work to apply to the fishery
market, by using data at regional or municipal level.
The
research described in this paper was supported by the Project “Bandiera
(Flagship) RITMARE - La Ricerca Italiana per il Mare (The Italian Research for
the Sea)” coordinated by the National Research Council of Italy and funded by
the Italian Ministry for Education, University and Research, under the National
Research Program 2011-2013.
[1]We thank the CERIS-CNR Research
Centre of Turin and Roberto Zoboli for helpful comments and suggestions. The
usual disclaimers apply.