Real Option Analysis and the Black-Scholes Model

Tom Arnold

Chapter Chapter 8 in A Pragmatic Guide to Real Options, 2014, pp 167-182 from Palgrave Macmillan

Abstract: Abstract The contribution of the Black-Scholes Model (BSM, 1973; Merton, 1973) to the field of finance has been enormous. There are a number of extensions to the model (see Haug, 2007) to allow it to be applied to options on securities other than stocks that do not pay dividends. However, although the BSM has been applied to perform real option analysis, it does not work very well for valuing real options.

Keywords: Cash Flow; Real Option; Future Contract; Strike Price; Future Cash Flow (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-137-39116-2_8

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DOI: 10.1057/9781137391162_8

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