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Hi John
Good morning.
Would you say there are similarities between “Option to Exploit a Follow-On Project ” and “Option to Redploy or Switch”?
The first would mainly involve the possibility of further expansion using assets developed in the first project (resulting in a call option), while the second is mainly involved when the company can use its productive assets for activities other than the original one (although this could result in a put option and call option).
I am trying to understand the differences between the two.
Thank you.
The first is an option to expand and is a call option.
The second is an option to redeploy and would mean stopping the initial project earlier than planned, and is a put option.
I do explain the various option in my free lectures on real options 🙂
Thank you John
I only asked the question after having watched your free lecture on Real Options!!!
I know the first was an option to expand and a call option – I think I said that in my question.
I am not sure about the second – I read in one of the textbooks that it could result in a put option and a call option. But you are saying otherwise – just a put option….
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