Managers responsible for capital investment decision
making need valuation models that can navigate both
corporate finance and competitive strategy to generate
well-grounded prices. Real options provide the firm with
flexibility to adapt to changes in its environment. The
dynamic nature of real options in the new economy makes
them more difficult to price than stock options. Since
real options cannot be modeled by replicating portfolios
of traded securities, payoff estimates are not as
precise as those for stock options. This paper will
analyze the aspects of the new economy that affect the
calculation of growth opportunities, and introduce
models that can allow managers to better understand how
these aspects influence real asset option payoffs. pdf
