Description: Traditional predictive tools are not built to deal with the variability the world currently faces. The COVID-19 pandemic amounts to a prolonged black swan event, for which one must look past conventional assessments to arrive at any level of confident predictions. Behavioral analysis factors for biases and heuristics designed specifically for uncertain evolutionary contexts, and which are the primary drivers of market participants’ decisions at present. Through understanding the most likely behaviors of individuals, it becomes possible to arrive at an aggregate understanding of market outcomes.

Description: This article is part of a 2 part series on real options analysis (ROA). Before you can understand the limitations of ROA, you must first understand the difference between risk and uncertainty. This article goes into detail explaining the vast differences between the two phenomena.