Binary option pricing using fuzzy numbers or paste a DOI name into the text box. An automated process has detected links on this page on the local or global blacklist.
Real options are generally distinguished from conventional financial options in that they are not typically traded as securities, and do not usually involve decisions on an underlying asset that is traded as a financial security. A further distinction is that option holders here, i. Real options analysis, as a discipline, extends from its application in corporate finance, to decision making under uncertainty in general, adapting the techniques developed for financial options to “real-life” decisions. This simple example shows the relevance of the real option to delay investment and wait for further information, and is adapted from “Investment Example”.
Consider a firm that has the option to invest in a new factory. It can invest this year or next year. The question is: when should the firm invest? If the firm invests this year, it has an income stream earlier.