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Real Option Analysis and the Black-Scholes Model

In: A Pragmatic Guide to Real Options

Author

Listed:
  • Tom Arnold

Abstract

The contribution of the Black-Scholes Model (BSM, 1973; Merton, 1973) to the field of finance has been enormous. There are a number of extensions to the model (see Haug, 2007) to allow it to be applied to options on securities other than stocks that do not pay dividends. However, although the BSM has been applied to perform real option analysis, it does not work very well for valuing real options.

Suggested Citation

  • Tom Arnold, 2014. "Real Option Analysis and the Black-Scholes Model," Palgrave Macmillan Books, in: A Pragmatic Guide to Real Options, chapter 0, pages 167-182, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-137-39116-2_8
    DOI: 10.1057/9781137391162_8
    as

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