Abandonment option

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Abandonment option

The option of terminating an investment earlier than originally planned.

Abandonment Option

A clause in some contracts allowing one party or the other to terminate the contract before completion. The abandonment option adds value to a contract that can be traded because it allows both parties a great deal of flexibility in case the contract proves unprofitable. However, the clause is most common in contracts between financial advisers and their clients.
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References in periodicals archive ?
Abandonment options represent yet another type of real option.
Now we can ask whether operating a gas-powered car with such an abandonment option would be more valuable than operating a gas-powered car without this option.
The two most common options used in corporations are growth options and abandonment options.
Real Options--American, European, Bermudan, and Customized Abandonment Options.
Real Options--Contraction, Expansion, and Abandonment Options.