A real option is a reference to
A) Options on physical assets.
B) Options on commodity futures.
C) The value of flexibility embedded in a real asset.
D) Choices a and b.
E) Choices b and c.

Question

Quizplus · Accepted Answer

A real option refers to the value of flexibility embedded in a real asset, such as the option to delay an investment or expand production. It is not specifically tied to options on physical assets or commodity futures, although these types of options may incorporate real option thinking. Therefore, answers A and B are incorrect. The correct answer is C: the value of flexibility in real assets. Neither choice D nor E is correct as D includes A, which is incorrect, and E includes B, which is incorrect.

A Real Option Is a Reference to