Real Options Analysis
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Real Options Analysis complements Adaptation Strategy Valuation as another CAW tool for enabling climate risk-informed investment decisions. Adaptation Real Options (ARO) adopts established, market modeling methodology for setting an optimal strike price (or price at which a buyer is entitled to buy an option) given the range of variability of the underlying market and applies it to investments under climate-vulnerable scenarios, substituting the natural, but bounded, variability of impacts under future climate change for the volatility of the market.

ARO allows an investor to defer what would be a money-losing investment under climate uncertainty to a future date at which the investment would make net returns by obtaining an option to develop the project  at a "strike price" (or agreed-upon investment outlay) calculated using ARO analysis.

A more detailed discussion of how ARO works in conjunction with ASV can be found here. You can also contact us any time.

Financial Graphs
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Stock Market Data