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Empirical Evidence in Support of a Proposed Methodology for Valuing Uncertainty and Flexibility in Complex, Large-Scale Systems

47 Pages Posted: 25 Apr 2011  

S.B. von Helfenstein

Value Analytics & Design LLC

Date Written: February 28, 2011

Abstract

This paper presents empirical evidence, taken from the largest private real estate development project in the world, in support of a proposed quantitative methodology for incorporating uncertainty and flexibility in systems design. The proposed methodology, though in the early stages of development, offers an interesting and hopeful means by which to address a number of the practical impediments to the wider acceptance and use of real options analysis. While its originators tested it on highly simplified, self-constructed data, this paper examines its appropriateness and usefulness using data from a real-world systems design project of great complexity and scale.

Keywords: Large-Scale Complex Systems, Valuation, Uncertainty, Flexibility, Systems Design, Real Options

JEL Classification: C53, G39, L70

Suggested Citation

von Helfenstein, S.B., Empirical Evidence in Support of a Proposed Methodology for Valuing Uncertainty and Flexibility in Complex, Large-Scale Systems (February 28, 2011). Available at SSRN: https://ssrn.com/abstract=1821751 or http://dx.doi.org/10.2139/ssrn.1821751

Sarah Von Helfenstein (Contact Author)

Value Analytics & Design LLC ( email )

One Broadway, 14th Floor
Cambridge, MA 02142
United States
6174011122 (Phone)

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