What’s the difference between a financial optionand a real option? What are some specific typesof real options? Do real options just occur, or canthey be “created”?
What’s the difference between a financial optionand a real option? What are some specific typesof real options? Do real options just occur, or canthey be “created”?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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What’s the difference between a financial option
and a real option? What are some specific types
of real options? Do real options just occur, or can
they be “created”?
Expert Solution
Step 1
Answer:
Differences between financial options and real options:
Financial options are those generated on the shares, such as debt or stock instruments. In contrast, real options are those dealing with the actual physical asset. Even the capital budgeting projects will be real physical assets. Regarding the real options, there are more types of real options available that are linked to specific items such as resources like gas, oil, wheat and gold.
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