Real options and customer management in the financial services sector

This paper considers how managers of financial services companies can use real options pricing to value the uncertainty associated with prospective purchasing and selling decisions. The paper provides a simple application of real options theory (call option) to the prospective sale of a simple financial (insurance) product. It also examines some of the issues that might have to be considered to ensure the successful application and use of real options techniques in the effective strategic and operational management of customer equity in the financial services sector.