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• Can be defined as the value of flexibility to adapt to take advantage of market volatility:
- Timing of purchase of a ship, its sale, the type of charter we choose and the choice of amount and term of debt financing gives the shipowner many options.
- Value of optionality can be calcluated as the difference between the Net Present Value (NPV) of the cash flow from the investment, taking into account the range and probality of possible outcomes and the NPV of the static or “single-point” cash flow from the investment.
• The main factors determining the value of optionality are:
- Investment cost
- Time to expire (Remaining economic life of ship)
- Uncertainty (Risk measured by volatility) | 
