Real Option Analysis: Work in Progress, in Need of Progress
This chapter is openly polemical. This book would not exist if real options analysis (ROA) had progressed the way other fields of knowledge do. It did not. That has everything to do with the stifling impact of Black-Scholes on ROA. The modern form of financial option theory started around 1973 with Black-Scholes. The concept of real option was introduced soon afterward in 1977. After all these years, ROA is nowhere as developed as financial option theory. The difference of degree of advancement between the two is so huge that it begs to be explained. This is the theme of this chapter.
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