Real Options (Abridged)

10 Pages Posted: 2 Jun 2017

See all articles by Samuel E. Bodily

Samuel E. Bodily

University of Virginia - Darden School of Business


This note is an abridged version of QA-0639, "Real Options."



Rev. Apr. 9, 2014

Real Options (Abridged)

All business decisions are real options, in that they confer the right but not the obligation to take some initiative in the future.

—Judy Lewent, CFO, Merck

Although you may not go as far as Judy Lewent, who claims that “all business decisions are real options,” you will likely agree that options are critically important in decision making. Understanding how to create them and to value them are vital skills for business, personal, and policy decisions. Decision analysis is an ideal approach to provide insight into options.

. . .

Keywords: quantitative analysis, option valuation, Monte Carlo simulation, valuation, decision trees

Suggested Citation

Bodily, Samuel E., Real Options (Abridged). Darden Case No. UVA-QA-0799. Available at SSRN:

Samuel E. Bodily (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4813 (Phone)
434-293-7677 (Fax)


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