What are real options approaches?
Owner of the option:
pays the option premium (price)
Receives the right to…
buy (call option)
sell (put option)
the underlying asset of a fixed price (exercise price)
Writer of the option:
receives the option premium (price)
Obliged to…
sell (call option)
buy (put option)
How does the Profit and Loss Structure look like for the Buyer for the Call and Put Option?
Call Option
Purchasing a call option by paying a premium to profit from rising prices of the underlying. Gives the right to buy an underlying for the fixed exercise price.
Put Option
Purchasing a put option by paying a premium to profit from falling prices of the underlying.
Gives the right to sell the underlying for a fixed exercise price.
How does the Profit and Loss Structure look like for the Seller for the Call and Put Option?
Selling a call option in return for a premium, to profit from falling prices of the underlying. Obligation to sell the underlying for the fixed exercise price, if the option owner chooses to buy.
Selling a put option in return for a premium to profit from rising prices of the underlying. Obligation to buy the underlying for the fixed exercise price, if the option owner chooses to sell.
What are Value Drivers of financial options?
How does the Profit and Loss Structure for Call Real Option for the Buyer look like?
Call Real Option
The owner of the option has the right to make an investment in the future.
Put Real Option
The owner of the option has the possibility of disinvesting from an investment by selling it.
What three characteristics exist of Investments mirrored by Real Options?
Real refers to investment decisions!
Describe the Relationship between Real options Reasoning und portfolio innovativeness!
The idea to treat everything i see (all business decisions)as real options, so called real options reasoning, positively influences portfolio innovativeness and therefore success
What types of the Real Option Approach can be distinguished?
Give an Overview of the Option Pricing Models!
What are Basic forms of Real option?
Growth option: e.g. buying a piece of undeveloped land
Learning option: Developing R&D Projects
Insurance Option: carrying an umbrella on a rainy day
Evaluate the Real Option Valuation!
Derive own examples regarding the real options approach!
TBD -> Learning objectives
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