Military Software Black-Scholes Pricing Model: Value of Software Option and Volatility

摘要

The idea of real option is applied in military software pricing in this paper. By analysis of Black-Scholes pricing model, we figure two crucial variables. One is value of software option that is regarded as estimated cost in our study. We give the logical analysis based on the option feature of estimated cost and also the practical test by building up a system of equations. The other one is the volatility whose value can be estimated with the method of Monte Carlo analogy. Finally, the application of this military software pricing model is demonstrated in a real case.