Real Options Analysis

More than thirty years after the debut of the famous Black-Scholes formula, and after MIT professor Stewart C. Myers conceived this term, real options continue to show a big gap between theory and practice. Recent evidences suggest that this valuation technique may be losing traction: the rate of adoption in corporations has been slow due to its complexity and lack of understanding of the possible applications of an intuitive concept that heavily relies on complex financial theory analysis. The computational complexity and the academic focus on making models more accurate rather than simple makes real options analysis a black box. The main goal of this book is to investigate the major challenging factors hindering a wide diffusion of such valuation tool and to present alternative approaches to solve these obstacles. Putting together an extensive collection of dominant literatures, the book will try to define what are the recent evolutions and outcomes on this subject, pointing out some general findings and developing a set of advices finalized to bridge the gap between theory and practice.