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Valuing new random genetically modified (GM) traits with real options

Author

Listed:
  • William Wilson
  • Sumadhur Shakya
  • Bruce Dahl

Abstract

Purpose - – The purpose of this paper is to develop an analytical model to value traits at different developmental phases and to determine the value of drought tolerance (DT) in wheat using GM technology. Design/methodology/approach - – A stochastic binomial real-options model of GM traits was developed to estimate the value of a DT wheat trait. Findings - – The results indicate that the value of DT wheat using GM technology is in-the-money at each development phase. The greatest value would accrue for the Prairie Gateway and Northern Great Plains regions in the USA. Research limitations/implications - – The approach is useful for valuing high-cost risky investments in technology and results provide guidance for development strategies. Originality/value - – The model is original and its applications to wheat are unique.

Suggested Citation

  • William Wilson & Sumadhur Shakya & Bruce Dahl, 2015. "Valuing new random genetically modified (GM) traits with real options," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 75(2), pages 213-229, July.
    • Handle: RePEc:eme:afrpps:v:75:y:2015:i:2:p:213-229
    DOI: 10.1108/AFR-05-2014-0014
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    Citations

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    Cited by:

    1. Dahl, Bruce & Wilson, William W., 2018. "Risk premiums due to Fusarium Head Blight (FHB) in wheat and barley," Agricultural Systems, Elsevier, vol. 162(C), pages 145-153.
    2. David W. Bullock & William W. Wilson & Joseph Neadeau, 2021. "Gene Editing Versus Genetic Modification in the Research and Development of New Crop Traits: An Economic Comparison," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(5), pages 1700-1719, October.
    3. William W. Wilson & Lee Vetsch & David W. Bullock, 2022. "Valuing an agricultural technology startup using real options," Agribusiness, John Wiley & Sons, Ltd., vol. 38(4), pages 771-785, October.
    4. William W. Wilson & Jesse Klebe, 2021. "Commodity procurement as contingent claims: Capturing risk and real options in flour milling," Agribusiness, John Wiley & Sons, Ltd., vol. 37(2), pages 348-370, April.

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