Real options as an alternative methodology to assess investment projects

This paper aims to broaden the applicability of the assessment methodology of investment projects through real options as a key element for investment decision making. Traditional project valuation methodologies are described and their gaps, which special characteristic is uncertainty, are presented. A parallel between financial and real options that could be used for valuation is made, using the binomial tree method. Finally, a case study in the construction sector shows a project valuation using expand and waiting options. [PUBLICATION ABSTRACT]