Which three of the following are difficulties of real option analysis?
A) The inevitably short lifetime of the option
B) The difficulties of measuring uncertainty
C) The risk of over optimism
D) The complexity of the valuation process

Question

Quizplus · Accepted Answer

Real option analysis involves measuring uncertainty, which can be difficult to quantify accurately. There is also a risk of over-optimism, where decision-makers may be overly optimistic about the potential outcomes and benefits of the option. Additionally, the valuation process for real options can be complex, as it may involve significant data gathering and analysis, as well as the use of specialized models and techniques. While the lifetime of the option may be short, this is not typically considered one of the primary difficulties of real option analysis.

Which Three of the Following Are Difficulties of Real Option