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Home > QFINANCE Dictionary > Definition of real option

Definition of

real option

Stockholding & Investments

choice available to investor in tangible investment the opportunity to choose a course of action that an investor has when investing in something tangible such as a business project

Recommended Further Reading (Term count)
  • Quantifying Corporate Financial Risk
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    Consider the case of a company that has experienced six months of cash flows this year and wants to forecast the next six months. The usual way to do this is to predict a cash flow growth rate—expected, high, and low—and to base the analysis on these choices. A sample cash flow projection might be illustrated graphically in Figure 1.Figure 1. Deterministic cash flow forecast for last six months In reality, of course, several different cash flow...
  • Options, Futures, and Other Derivatives
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    Given the poor state of public-sector resources around the world, made even worse by the global financial crisis, governments have been seeking to enhance resources by attracting private sector participation. Such participation may be somewhat unstructured, or more formal. The public–private partnership (PPP) is one of the formal approaches to cooperation. PPP, in various forms, is not a new construct. The current frailties of the global economy...
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Definitions of ’real option’ and meaning of ’real option’ are from the book publication, QFINANCE – The Ultimate Resource, © 2009 Bloomsbury Information Ltd. Find definitions for ’real option’ and other financial terms with our online QFINANCE Financial Dictionary.

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