Study and application of military software pricing based on option pricing

Author

Qin, Wu ; Ruxiang, Wei

Author_Institution

Dept. of Equip. Econ. & Manage., Naval Univ. of Eng., Wuhan, China

Volume

2

fYear

2010

fDate

3-5 Oct. 2010

Abstract

The idea of real option is applied in military software pricing in this paper. By redefinition and combination of the two typical option pricing models (Black-Scholes model and binomial tree model), we find out that option value of military software is estimated software cost. Since the crucial variable of Black-Scholes model is the volatility whose value can be estimated with the method of Monte Carlo analogy. At last, the application of this military software pricing model is demonstrated in a real case.

Keywords

Monte Carlo methods; binomial distribution; military computing; pricing; software cost estimation; trees (mathematics); Black-Scholes model; Monte Carlo method; binomial tree model; military software pricing; option pricing; software cost estimation; Biological system modeling; Equations; Mathematical model; Monte Carlo methods; Pricing; Programming; Software; Black-Scholes model; Monte Carlo analogy; binomial tree model; estimated cost; military software pricing; value of software option; volatility;

fLanguage

English

Publisher

ieee

Conference_Titel

Software Technology and Engineering (ICSTE), 2010 2nd International Conference on

Conference_Location

San Juan, PR

Print_ISBN

978-1-4244-8667-0

Electronic_ISBN

978-1-4244-8666-3

Type

conf

DOI

10.1109/ICSTE.2010.5608793

Filename

5608793