(Real-)options, uncertainty and comparative statics: Are Black and Scholes mistaken?

The purpose of this paper is to analyze the influence of uncertainty on the value of real options while allowing for a possible change in the value of the underlying asset. We show that the proposition of a strictly positive influence of uncertainty does not hold, if the value of the underlying asset changes due to a Variation of the Standard deviation. Only if the underlying risk is unsystematic or the binding relation between risk and return is neglected, the strictly positive effect of uncertainty can be retained. In all other cases, the influence becomes ambiguous. In addition, we discuss the consequences of our results on a more economic level to convey an understanding of when the procedure dealt with would be indicated.