Real Options¶
Trigeorgis, L. (1996). Real Options: Managerial Flexibility and Strategy in Resource Allocation. MIT Press.
Cited by¶
6 citations across 6 artifacts.
Each citation links to the sentence it supports in the citing article.
Primes¶
- Optionality
- Increasing optionality costs money or complexity upfront; the benefit is realized only if the future state justifies exercising the option.
This sourceCanonical real-options text: prices managerial flexibility (the option to defer, expand, contract, abandon, or switch) explicitly, making the cost of locking in versus preserving reversibility quantifiable in capital-allocation decisions.
- Increasing optionality costs money or complexity upfront; the benefit is realized only if the future state justifies exercising the option.
- Postponement
- Finance and contracting. Options, convertibles, and letters of intent that hold commitment open until information arrives; staged investment that defers the next tranche until milestones are observed.
This sourceTreats options, staged investment, and the value of deferring commitment until uncertainty resolves.
- Finance and contracting. Options, convertibles, and letters of intent that hold commitment open until information arrives; staged investment that defers the next tranche until milestones are observed.
- Reversibility and Irreversibility
- Clarity about actual reversal costs enables better decision-making, as Trigeorgis (1996) shows in valuing managerial flexibility through real-options analysis that explicitly prices the cost of locking in versus preserving optionality.
This sourceCanonical real-options text: prices managerial flexibility (the option to defer, expand, contract, abandon, or switch) explicitly, making the cost of locking in versus preserving reversibility quantifiable in capital-allocation decisions.
- Clarity about actual reversal costs enables better decision-making, as Trigeorgis (1996) shows in valuing managerial flexibility through real-options analysis that explicitly prices the cost of locking in versus preserving optionality.
- Reversibility Horizon
- It separates a region of high reversibility (early stage, low cost to undo) from a region of low reversibility (late stage, high cost to undo), with a sharp or step-function boundary where reversal cost overtakes continuation cost—a structure Trigeorgis (1996) analyzes formally through real-options valuation of managerial flexibility.
This sourceCanonical real-options text: prices managerial flexibility (the option to defer, expand, contract, abandon, or switch) explicitly, making the cost of locking in versus preserving reversibility quantifiable in capital-allocation decisions.
- It separates a region of high reversibility (early stage, low cost to undo) from a region of low reversibility (late stage, high cost to undo), with a sharp or step-function boundary where reversal cost overtakes continuation cost—a structure Trigeorgis (1996) analyzes formally through real-options valuation of managerial flexibility.
Mechanisms¶
- Staged Option Investment Plan
- The company is not betting $400M on a decade-out forecast; it is buying, for a few million and a protected reserve, the right to keep deciding as evidence arrives.
This sourceTreats real options as managerial flexibility to revise an investment decision as uncertainty resolves.
- The company is not betting $400M on a decade-out forecast; it is buying, for a few million and a protected reserve, the right to keep deciding as evidence arrives.
- Strategic Options Register
- Written triggers are what let a preserved option behave like a genuine real option, exercised when its moment arrives
This sourceTreats real options as managerial flexibility to exercise, defer, expand, contract, abandon, or switch investments as conditions change.
- Written triggers are what let a preserved option behave like a genuine real option, exercised when its moment arrives
Verification¶
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Links previously used in the corpus¶
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