Tarik Driouchi
Real options in service investments: scenarios from defence
Driouchi, Tarik; Pennesi, Paris; Kapletia, Dharm; Cuthbert, Rachel
Authors
Paris Pennesi
Dharm Kapletia
Rachel Cuthbert
Abstract
This paper addresses the theme of investment under uncertainty in services. We specifically apply principles of contingent-claims analysis to underline the value of flexibility, i.e., the real options, embedded in service level agreements (SLAs) and maintenance & repair investments in the context of aerospace and defence. We focus on path-dependent and complex contingent-claims, to show how the design of 'exotic' type options in service investments can provide valuable insurance policies against operational and financial risks for the customer, in addition to enhancing providers' incentives from superior service performance. For illustration, we highlight examples of barrier, lookback, compound, chooser and extendible options as flexibility clauses/alternatives for service provision in defence contracts.
Citation
Driouchi, T., Pennesi, P., Kapletia, D., & Cuthbert, R. (2009). Real options in service investments: scenarios from defence. International Journal of Services Sciences, 2(1), 1. https://doi.org/10.1504/ijssci.2009.021959
Journal Article Type | Article |
---|---|
Publication Date | 2009 |
Deposit Date | May 27, 2020 |
Journal | International Journal of Services Sciences |
Print ISSN | 1753-1446 |
Electronic ISSN | 1753-1454 |
Publisher | Inderscience |
Peer Reviewed | Peer Reviewed |
Volume | 2 |
Issue | 1 |
Pages | 1 |
DOI | https://doi.org/10.1504/ijssci.2009.021959 |
Public URL | https://uwe-repository.worktribe.com/output/5607250 |
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