At its core,real option analysis is a cross between decision-tree analysis and pure option-based valuation.

Question

Quizplus · Accepted Answer

Real option analysis involves assessing the potential value of investment opportunities by taking into account the flexibility to make future decisions based on uncertain outcomes. This approach combines elements of decision-tree analysis, which examines the various possible outcomes of a decision, with option-based valuation, which considers the value of the right to make choices in the future.

At Its Core,real Option Analysis Is a Cross Between Decision-Tree