Question: 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

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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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 full answer

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