5.4  CD1: 47 You are going to listen to an extract from a lecture on the theory of real options in investment.


Note: Real options are techniques that allow investments to be analyzed, while taking flexibility and uncertainty into account.


Listen and complete the text with two to five words in each space. The missing expressions include examples of word boundaries that may cause you difficulties.


I’m going to go through the theory of real options, and then I’m going to show you how they can be used to


on property assets. ‘Real options’ is a term which was coined ten or 15 years ago, when people began to realize that


the only thing you should look at in valuing assets, that a number of assets in companies have


And so the option theory you’ve been looking at can also be applied to instead of just companies particularly have . And that, in raising money, from an


option pricing perspective than they first thought. The idea of real options is that management is not just a passive participant, but that management can take in making and revising decisions that can


lead on from unexpected market developments such as, for example, the has gone up from about $85 a barrel to $100 a barrel over the last year. So, if


you were an oil producer this time last year, you would be taking a very different view on the


uncovered


. So the increase in oil prices has which make oil producers a


lot more valuable, and now you can bring oilfields that were not necessarily economic. So this is the kind of idea that when we’re looking at a project, we’re not just looking


, we’re actually looking at a cash flow that can be subject to a lot of optionality. , particularly isn’t option value.


44


English for Academic Study


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