What is ‘Abandonment Option’
A clause granting parties the option of withdrawing from the contract before the fulfillment or completion of all contractual duties. This clause adds value by giving the parties the ability to end the obligation if it is unprofitable.
Explaining ‘Abandonment Option’
Abandonment options are commonly used in bilateral agreements without a set time frame for expiry. Usually, one party may decide to exit from the relationship without penalty.
Further Reading
- Investor valuation of the abandonment option – www.sciencedirect.com [PDF]
- Profits versus losses: Does reporting an accounting loss act as a heuristic trigger to exercise the abandonment option and divest employees? – meridian.allenpress.com [PDF]
- The effects of abandonment options on operating leverage and investment timing – www.sciencedirect.com [PDF]
- The effects of abandonment options on operating leverage and forward hedging – www.sciencedirect.com [PDF]
- Valuation of the minimum revenue guarantee and the option to abandon in BOT infrastructure projects – www.tandfonline.com [PDF]
- Real options methodology in public-private partnership projects valuation – www.doiserbia.nb.rs [PDF]
- Real options and interactions with financial flexibility – www.jstor.org [PDF]
- Financial engineering in project management – journals.sagepub.com [PDF]
