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Real options in finance

Accepted version
Peer-reviewed

Type

Article

Change log

Authors

Lambrecht, BMAC 

Abstract

Although the academic literature on real options has grown enormously over the past three decades, the adoption of formal real option valuation models by practitioners appears to be lagging. Yet, survey evidence indicates that managers’ decisions are near optimal and consistent with real option theory. We critically review real options research and point out its strengths and weaknesses. We discuss recent contributions published in this issue of the journal and highlight avenues for future research. We conclude that, in some ways, academic research in real options has catching up to do with current practice.

Description

Keywords

real option, capital budgeting

Journal Title

Journal of Banking and Finance

Conference Name

Journal ISSN

0378-4266
1872-6372

Volume Title

81

Publisher

Elsevier
Sponsorship
I gratefully acknowledge financial support from the Cambridge Endowment for Research in Finance (CERF).