What is in finance, what is the real choice?
Analysis of real options (ROA) is a decision -making frame that calculates the value of a future business decision. ROA borrows from financial options. The financial possibility of the buyer gives the financial asset the right, but not an obligation, such as buying shares or bonds, at a predetermined price on the future date. Analogy is a real possibility of a managerial decision -making tool that calculates the value of a business decision that the manager has the possibility or right, but not the obligation to fulfill. For example, by considering options A and B analysis of real options maps different scenarios that branch from every possibility. Also known as scenarios analysis, the creator of the decision is able to take better informed decisions based on the estimated value of each scenario or point on the tree.
on capital markets, real analysis of options migrated from the analysis of investment tools for corporate finances where it is used to decide on capital allocation, suchRoda asset. This evaluation tool is used in all areas of business decision -making to assess managerial and strategic possibilities. In the United States government, the National Laboratory for renewable energy sources uses real possibilities to assess the financial, technological and market risk of various renewable energy technologies. The possibility to invest in wind or solar energy in various regions of the country can be evaluated on the basis of weather conditions such as wind and sun intermmen, and future energy and price prices and policy.
By providing a number of values in specific points in the future, a real analysis provides information about the optimal time for business decisions. When evaluating the long -term viability of an amanager who loses money, the possibility of sales of business, selling assets, closing of unprofitable product line, or reduction of labor size. The manager should be able to assess how each of these options affect the profitability of dia vision in three months, one year or two years.
The actual option analysis can provide a real value in business scenarios if the data is thin or highly uncertain results. The power of real option analysis is the robust analytical tools that it borrows from financial markets, which can significantly improve the available information for decision -making. For example, Monte Carlo analysis is commonly used to decide if there is a higher risk of unexpected price tips due to exogenous shocks.
oil embargo on energy markets is an example of an unexpected geopolitical event that could increase energy prices. According to business analogy, oil refineries operating in a high -risk hurricane region can use a real optanalysis of ions to take operating decisions based on business scenarios as usual or at the risk of completely shutdown. In this scenario, Real Option Analysis is further valued for its ability to assess the probability of an uncontrolled event - highlyunpredictable pattern of Mother Nature.