Real Option Approach to Evaluate Strategic Flexibility for Startup Projects

This article is devoted to investigation and evaluation of a startup project strategic flexibility depending on its available development options using real option approach. This approach combines ideas of corporate finance, real options and game theory, and forecasts the Risk-Neutral Probability measure and the value of a Call Option that come from Black-Scholes-Merton model. 

The findings enable us to estimate the value of managerial decisions, project flexibility and help entrepreneurs and investors to select the best choice of project strategic development.

Keywords: strategic real options, binomial method, strategic planning, strategic development, strategy valuation, venture capital, startup project.

Publisher: 3rd International Interdisciplinary Business-Economics Advancement Conference (IIBA), Conference Proceedings, Volume 3, 2015, ISSN: 2372-5885, University of South Florida Sarasota-Manatee, USA, p.360-368.

Dmytro Shestakov

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