Options embedded in real assets owned by firms are known as
A) Asset options.
B) Binomial options.
C) Company options.
D) Warrant options.
E) Real options.

Question

Quizplus · Accepted Answer

Real options are options embedded in real assets owned by firms, such as the option to expand a plant, enter a new market or abandon a project. Real options are influenced by factors such as market conditions, technological changes, and managerial flexibility. Real options provide firms with the flexibility to adapt to changing circumstances and make strategic decisions based on the potential for future value creation.

Options Embedded in Real Assets Owned by Firms Are Known