1 When can we use options models in the "real" world?
project outcomes closely imitate the price performance of a liquid "replicating portfolio" option pricing theory has to be justified.
2. Why do we use financial options models in the "real" world?
better method for evaluating projects in the face of uncertainty
3. What are principal differences between the options approach and the NPV approach?
Options are more valuable when projects are risky single, riskless discount rate throughout.
