Real Options: Managerial Flexibility and Strategy in Resource
Trigeorgis, L. 1996
In the 1970s and the
1980s, developments in the valuation of capital-investment opportunities
based on options pricing revolutionized capital budgeting. Managerial
flexibility to adapt and revise future decisions in order to capitalize
on favorable future opportunities or to limit losses has proven vital to
long-term corporate success in an uncertain and changing marketplace.
In this book Lenos Trigeorgis, who has helped shape the field of real
options, brings together a wealth of previously scattered knowledge and
research on the new flexibility in corporate resource allocation and in
the evaluation of investment alternatives brought about by the shift
from static cash-flow approaches to the more dynamic paradigm of real
options -- an approach that incorporates decisions on whether to defer,
expand, contract, abandon, switch use, or otherwise alter a capital
Comprehensive in scope, Real Options reviews current techniques of
capital budgeting and details an approach (based on the pricing of
options) that provides a means of quantifying the elusive elements of
managerial flexibility in the face of unexpected changes in the market.
Also discussed are the strategic value of new technology, project
interdependence, and competitive interaction.
The ability to value real options has so dramatically altered the way in
which corporate resources are allocated that future textbooks on capital
budgeting will bear little resemblance to those of even the recent past.
Real Options is a pioneer in this area, coupling a coherent picture of
how option theory is used with practical insights in into real-world
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