FINC6001 Practical Assignment Real Versus Financial Options in The Risk Management Strategy of An Early‐Stage Biotechnology Investment
SEMESTER 2 FINC6001 PRACTICAL ASSIGNMENT
REAL VERSUS FINANCIAL OPTIONS IN THE RISK MANAGEMENT STRATEGY OF AN EARLY‐STAGE
BIOTECHNOLOGY INVESTMENT
QUESTIONS AND MARKING GUIDE
(2000 +/‐10% words limit)
Shockley Jr., Curtis, Jafari and Tibbs (2002) shows how real options analysis can be used to value an
early‐stage R&D investment. Triantis (2000) reviews the motivation to manage corporate risks and
how this can be achieved by integrating financial and real risk management policies.
1. Identify the types of risks described in Triantis (2000) and how they may affect the valuation of
the early‐stage biotechnology investment presented in Shockley Jr., Curtis, Jafari and Tibbs (2002).
/10
2. Compare and contrast the real and financial options which can be used in risk management
strategies for the early‐stage biotechnology investment.
/10
3. Which would you choose to create an integrated risk management strategy? Please state reasons
to justify your choices.
/10
TOTAL MARK /30
REFERENCES:
REAL OPTIONS AND CORPORATE RISK MANAGEMENT
JOURNAL OF APPLIED CORPORATE FINANCE
Volume 13, Issue 2, Summer 2000, Pages: 64–73, Alexander J. Triantis
Article first published online : 6 APR 2005, DOI: 10.1111/j.1745‐6622.2000.tb00054.x
http://onlinelibrary.wiley.com/doi/10.1111/j.1745‐6622.2000.tb00054.x/epdf
THE OPTION VALUE OF AN EARLY‐STAGE BIOTECHNOLOGY INVESTMENT
JOURNAL OF APPLIED CORPORATE FINANCE
Volume 15, Issue 2, December 2002, Pages: 44–55, Richard L. Shockley Jr., Staci Curtis, Jonathan
Jafari and Kristopher Tibbs
Article first published online : 12 APR 2006, DOI: 10.1111/j.1745‐6622.2002.tb00694.x
http://onlinelibrary.wiley.com/doi/10.1111/j.1745‐6622.2002.tb00694.x/epdf