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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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.
Now we see that this abandonment option makes the gas-powered car more attractive by $300; i.
circumstances in which addition of learning and abandonment options can
options that are coupled with costless abandonment options.
continuation and abandonment options and staged investment options that
One such explanation sees the results being caused by managers exercising abandonment options (Hayn 1995).
Losses accompanying exercise of abandonment options are likely to be larger for investments that involve more firm-specific assets.
The two most common options used in corporations are growth options and abandonment options.
Abandonment options allow exit from (or liquidation of) a project with limited expenses.
Real Options--American, European, Bermudan, and Customized Abandonment Options.
Real Options--Contraction, Expansion, and Abandonment Options.