Which of the following represent limitations of real options?
A) Key assumptions often are very difficult to quantify, especially volatility
B) Project delays may incur significant opportunity costs
C) Options often are not independent; therefore, selecting one option may foreclose other options
D) Often requires complex modeling
E) All of the above

Question

Quizplus · Accepted Answer

All of the options listed represent limitations of real options. Key assumptions, such as volatility, can be difficult to accurately quantify. Project delays can result in missed opportunities that can have significant costs. Selecting one real option may preclude the possibility of pursuing other options, which can limit flexibility. Finally, the nature of real options can make them complex to model accurately, adding an extra layer of difficulty to their use.

Which of the Following Represent Limitations of Real Options