ABSTRACT
This chapter addresses the problem of a balanced assessment of the usefulness of Real Options Theory (ROT) for valuing IAs, analysing the pros and the cons of ROT. It demonstrates that a real options lens can be fruitfully employed for capturing the economic substance of IAs, so making ROT effective in their valuation. The chapter recognises that a ROT-based valuation of IAs can leave out neither the relationship between existing IAs and the one to be valued, nor the analysis of how such existing assets influence the ROT-based value of an on going IAs investment. It presents the investment life-cycle model, where each single phase can be analysed in terms of real options that become available and the role of IAs in providing support to their value. The chapter analyses the problems arising from the relationship between value and uncertainty of a real option, and the techniques used for calculating the value of a real option.
