3. Case Applications

Let us now look at some typical case applications of options that are embedded in investment decisions. The purpose is to identify the relevant valuation parameters and to discuss to what extent we are actually dealing with a real option. The options we are considering are the following:

  • Option to delay taking an investment decision
  • The option to expand in the future
  • The option to abandon an investment

Please note that some of the case illustrations are adapted from Damodaran.