Real Options (Abridged)

Abstract

This note is an abridged version of QA-0639, "Real Options." Excerpt UVA-QA-0799 Rev. Apr. 9, 2014 Real Options (Abridged) All business decisions are real options, in that they confer the right but not the obligation to take some initiative in the future. —Judy Lewent, CFO, Merck Although you may not go as far as Judy Lewent, who claims that “all business decisions are real options,” you will likely agree that options are critically important in decision making. Understanding how to create them and to value them are vital skills for business, personal, and policy decisions. Decision analysis is an ideal approach to provide insight into options. . . .