Section outline

  • In this concluding section, we take a closer look at how to identify real options and how to implement real option valuation. To understand whether a real option is "real" (valuable), three simple questions can help: Is there optionality? Is there exclusivity? Can we value the optionality? To implement the valuation models, we then need to estimate the relevant parameters. The section briefly discusses how we can get rough estimates of the key value drivers of options. Then we look at specific cases, including the options to delay, expand, and abandon. We conclude with some general remarks about the management implications or real options.