ABSTRACT
This book is meant for anyone approaching investment decision making systematically and analytically when uncertainty and flexibility are present in areas such as life sciences, commodities, energy, technology, manufacturing, and financial services. Uncertainty typically exists in all aspects of investment decisions-timelines, costs, success rates, market potential-and is often ignored in traditional financial analysis and decision making. Flexibility means the ability to select, defer, abandon, expand, switch, and optimize among alternatives that drive current and future decisions. The term decision options is used to represent decisions that have option-like characteristics. Readers may be familiar with financial options (such as a call option on a stock). The price of a call option is driven by the uncertainty in the underlying asset (on which the option is based, such as a stock) and the inherent flexibility (the right but not the obligation to exercise) in them. Decision options are decisions in real life and on real assets driven by the uncertainty in the underlying assumptions and the flexibility in the nature and timing of the decision. The value of decision options is driven by the same parameters that influence the value of financial options. However, decision options are not single-standing options and cannot be solved by available closed-form formulas.
