Method of real options in managing investment projects

Abstract

A key factor for the success of the project management is the availability of a clear pre-defined plan, minimizing risks and deviations from the plan, efficient management of changes (as opposed to process, functional management, service level management). Using the binomial method to estimate the value of real options, they proceed from the assumption that the number of links is discrete and known in advance. The logic of this approach requires that their number corresponding to the frequency of making the most significant decisions for the project. The nodes of the lattice should be those moments in time in which strategic decisions are made on reducing, developing, switching business, etc. In general, the use of the real options method extends the tools to justify decisions in managing investment projects.