Real Options and their Role in Projects FinancialValuation

Abstract

The Real Options Method is considered as one of the best actual methods in projects financial valuation. It applies financial option valuation techniques to capital budgeting decisions. Like financial Option, a real option is the right (not the obligation) to undertake certain business initiatives, such as deferring, abandoning, expanding, staging, or contracting a capital investment project, and in recent years, Real Options Analysis has gained momentum both as a professional discipline and as a subject in its own right.
The aim of this paper is to explore and analyze the theory and practice of Real Options Method.