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| Author: | Baecker, P.N. Hommel, U. |
| Title: | 25 years real options approach to investment valuation: Review and assessment |
| Journal: | Zeitschrift für Betriebswirtschaft
2004 : VOL. 74:3, Ergänzungsheft, p. 1-53 |
| Index terms: | finance investment valuation |
| Language: | eng |
| Abstract: | 25 years since the first appearence of the term 'real options', (hereafter as: R-O.) this article reviews the main contributions to R-O. theory, assessing the impact on the understanding of managerial behaviour in an environment characterized by economic uncertainty and flexibility. Next to the option pricing foundations, emphasized is also the R-O's role for the extraction and commercialization of natural resources, research and development (R&D), corporate risk management and foreign direct investment (FDI), production flexibilities, and game-theoretic treatments of corporate investment decisions. In addition, discussed are the reasons for the reluctance of corporate practitioners to employ R-O. analysis in the capital budgeting decisions. |
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