Real option

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Real option

An option or option-like feature embedded in a real investment opportunity.

Real Option

A situation in which an investor is able to choose between two different investments where both choices involve tangible assets. That is, in a real option, the investor may choose between assets like land or inventory; financial instruments like stocks and bonds are not involved in a real option. It should be noted that a real option has nothing to do with an option contract.
References in periodicals archive ?
'We want to provide real options to people who spend more hours on the road than necessary as well as to drivers, whose welfare is always improved by more competition in the sector,' it said in a statement.
We discuss, in the context of firm labor demand when product demand and costs are uncertain, real options, the right but not the obligation to flexibly adjust firm labor input.
Growing Presence of Real Options in Global Financial Markets
"We felt we would be on the bones, but unfortunately Hask and Thomas haven't gone which puts us in a far stronger position, and with Nizaam coming in we now have real options in the back row."
In this paper, we propose a model that combines a Discounted Cash Flow model with real options in order to take into account the different drivers of real estate investment value, such as net asset value, future rentals income and capital expenditures policy.
This paper will address the application of the concept of financial reengineering for a disaster-risk-sensitive investment project, namely real options analysis, and specifically, shutdown options.
Real options were introduced as a complement to the information provided by the cash flow sequence presented by an investment project.
Of the four options, clearly two are not real options, business as usual and negotiation.
The first article, "Valuation of Real Options as Competitive Prototyping in System Development," by Diana I.
Zhu, "Evaluating coal bed methane investment in China based on a real options model," Resources Policy, vol.