Abstract
This study proposes a unified framework for formulating and computing the financial value of various infrastructure projects (real options). We first show that the pricing problems of typical real options can be represented as a VIP (variational inequality problem). Our analysis then reveals that the VIP reduces to a LCP (linear complementarity problem) by using certain function transformation techniques. This enables us to develop an efficient method for solving the real option problems in a unified manner, exploiting the recent advances in the theory of complementarity problems.
