Apply real options analysis to value managerial flexibility embedded in investment decisions.
NewMaintained
Automatic
◆Finance & Accounting pack
Last verified 8/28/2026
What it changes
Passed 7 of 22 test cases with the skill, and 15 of 22 without it.
Without skill67%
With skill33%
0 fixed19 passed either way1 still failing2 broke
Pass-rate lift
-33 pp
Tokens
+25%
Agent turns
0%
Response time
-9%
Model gemini-3.6-flashMeasured 8/28/2026v119 of 22 cases passed with skill
Tokens, turns and time describe resource use, not a dollar price.
What's inside
The instructions your model reads when the skill loads.
SKILL.md103 linessingle file
Real Options
Overview
Real options theory applies financial option pricing logic to corporate investment decisions. It recognizes that managers can adapt their decisions as uncertainty resolves — deferring, expanding, contracting, or abandoning projects. Traditional NPV, which assumes a now-or-never commitment, systematically undervalues projects with significant flexibility.
When to Use
Evaluating investments with high uncertainty and managerial flexibility
Comparing staged vs. committed investment strategies
Valuing natural resource extraction, R&D, or platform investments
When NPV is near zero but the project has strategic optionality
When NOT to Use
For routine, low-uncertainty investments where NPV suffices
When flexibility is contractually or practically absent
If the option exercise conditions are unclear or unquantifiable
Assumptions
IRON LAW: Traditional NPV undervalues projects with significant
managerial flexibility. Expanded NPV = Static NPV + Option Value.
Ignoring optionality leads to systematic underinvestment in
high-uncertainty, high-flexibility projects.
Key assumptions:
Managers can and will exercise flexibility optimally
Underlying asset value follows a stochastic process
Option exercise is feasible (legal, organizational, technical)
Market exists (or proxy exists) to estimate volatility
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