tailieunhanh - Aerospace Technologies Advancements 2012 Part 18

Tham khảo tài liệu 'aerospace technologies advancements 2012 part 18', kỹ thuật - công nghệ, cơ khí - chế tạo máy phục vụ nhu cầu học tập, nghiên cứu và làm việc hiệu quả | A Real Options Approach to Valuing the Risk Transfer in a Multi-Year Procurement Contract 489 price would have increased to 134 million. This is due to the upside potential of the MYP and SYP. The exchange option is essentially a put option with a stochastic strike price which allows the protection buyer to capture more payoff if the MYP turns out to yield more units. This assumes that the risk of the MYP is symmetric. There is no reason to believe otherwise since the government can always buy more units than planned if they are needed. 15. Other real options embedded in an MYP Within this chapter we only have the scope to focus on a single real option example within the MYP contract. However there is at least one other real option available to the contractor with a sole source production franchise such as a major aircraft missile ship etc. This is because defense contracts are incomplete leaving the contractor with residual control of cost reduction innovations. While we will not estimate the value of this real option here we mention it because in some cases it is potentially worth far more than the revenue stabilization discussed here. Regulatory lag is an incentive concept that emerged from explicitly regulated industries such as utilities. These industries profits are regulated directly through rate setting . kWhr or through rate of return settings by a regulatory authority. Between rate settings the utility is free to innovate and achieve higher profits. Upon the next regulatory oversight review the regulator discovers the new cost structure and adjusts the new rate accordingly to a lower profit level-presumably slightly above the weighted average cost of capital for the utility. Longer periods between regulatory oversight periods . higher regulatory lag mean greater opportunities for higher profits. Similarly a defense contractor with a sole source series of production contracts for a weapon system has the incentive to achieve greater than expected .