Real options can be analyzed using a scenario approach with decision trees or using the Black-Scholes Option

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Real options can be analyzed using a scenario approach with decision trees or using the Black-Scholes Option Pricing Model. What are the pros and cons of the two approaches? Is one procedure “better” than the other?

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Intermediate Financial Management

ISBN: 978-1111021573

10th Edition

Authors: Brigham, Daves

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Question Posted: Feb 03, 2012 12:39 AM

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Real options can be analyzed using a scenario approach with decision trees or using the Black-Scholes Option

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See the BOC model for an example of a scenario analysis and a BlackScholes analysis for an investment timing option Similar analyses for growth and ab...View the full answer

Intermediate Financial Management

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