A Real Options Model for Risk Hedging in Grid Computing Scenarios

Abstract

The acquisition of remote IT resources via Grid or Cloud Computing for a certain amount of time, instead of setting up a proprietary IT infrastructure, has attracted much attention during the last years, as technical obstacles are overcome. In order to reduce their maintenance cost of internal IT clusters, many hard- and software providers reconsider to offer these resources in grid and cloud markets. However, participants in these markets bear some uncertainties and risks which can be hedged against by resource reservation. In this work we analyze the use of real options traded at an additional contract market, to efficiently manage economical issues arising from the realization of a flexible resource reservation scheme. We derive the necessary conditions that even risk neutral agents have incentives to participate in such a market, as it increases their expected utility.