Real Option Valuation

The Real Option Valuation model is a comprehensive set of option pricing tools that evaluates the strategic value embedded in a range of investment scenarios. Unlike traditional discounted cash flow investment analysis, which only considers whether an investment can outperform the hurdle rate, this model also takes into account strategic options that come with many investments.

By identifying the possible options in your proposal and using the tools provided by the model, you can estimate the potential gains or losses associated with them. Key features of the Real Option Valuation model include ease and flexibility of input, with embedded help prompts, and an informative 'Quick Start' menu that helps you choose the appropriate tool for your situation.

In addition, the model has modified Black Scholes models to value investment options such as delaying, expanding, or abandoning investments. There is also an automatic binomial 'tree' builder model for evaluating complex strategic options with multiple stages. The Nash equilibrium Game Theory model is included to evaluate market entry strategies in a competitive environment.

Finally, the model has the ability to predefine historical investment and/or industry risk profiles so that you can use them in any model within the suite. Overall, the Real Option Valuation model is an excellent tool for anyone looking for a more comprehensive approach to investment analysis.