Real Options Flashcards
1
Q
Distinction between Real and Financial Options
A
real options and underlying assets on which they are based are not often traded in competitive markets
2
Q
Real Options are…
A
the right to make a particular business decision - such as capital investment
3
Q
Option to Delay: Investment as a call option (3)
A
often a cost to delaying an investment decision
however by delaying gain additional information regarding the value of investment
decision to wait involves a trade-off between these costs and the benefit of remaining flexible
4
Q
Growth Option
A
option to invest in the future
5
Q
Abandonment Option
A
option to disinvest
