A real option strategic scorecard decision framework for it project selection by cesar muñoz bs universidad nacional de colombia, 1992 ms university of central florida, 1998.
An option is an entitlement without any obligation and it has been used to describe a variety of management decisions in business investment the description of management is effective and proper due to the introduction of real options theory, there has been a major breakthrough in the investment area.
Development option the first application of real options in real estate land use decisions was titman (1985), who uses a real options approach to analyze development of vacant land. Emerging from the financial market, real options (ros) have their origins in the seminal work of black and scholes and merton , who provided the theoretical formulation to evaluate financial assets—options ros are, nowadays, a growing valuation tool for infrastructure investments.
44 real options literature review real options evolve from the financial option its original intention was to deal with future uncertainties of a project’s implementation, so real option, bank credit.
Industry is the lack of a consistent systematic framework for locating real options in real estate as such, real option is too theoretical with lack of practical application as a solution, lucius (2001) identified some real options in real estate development based on the work of trigeorgis (1993a) but without a conceptual framework.
Real options valuation, also often termed real options analysis, (rov or roa) applies option valuation techniques to capital budgeting decisions a real option itself, is the right—but not the obligation—to undertake certain business initiatives, such as deferring, abandoning, expanding, staging, or contracting a capital investment project.