Real option theory
The Green Book, Central Government Guidance On Appraisal And Evaluation, Published by HM Treasury in 2020, defines real option theory or analysis as: ‘…used to estimate the benefit of delaying a decision by retaining flexibility in situations, where knowledge is increasing significantly over time, leading to potentially better informed decisions.’
The 2018 Green Book suggested that real option theory or real option analysis: ‘…is used to estimate the benefit of delaying a decision by retaining flexibility in situations, where knowledge is increasing significantly over time, leading to potentially better informed decisions.’
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