Real Options Model

Assumptions

Everything the model believes, stated before the math. If you do not buy one of these, do not buy the output.

1. Dependency order is validated against the canonical stage chain - reserve, diligence, permit, interconnect, build, expand; a stage preceding its prerequisite is rejected with the reason.
2. No option value without deterministic economics: missing costs yield structural optionality and a required-terms list, never dollars.
3. Exercise conditions must map to a verified milestone for the subject or a named date; anything else is rejected.
4. Abandon and switch paths remain visible alongside the chain.
5. Expired stages are rejected, never proposed.
6. Actions are proposals until separately approved - the model ranks, it never commits.

Derivation

Stages arrive as an action tree over the canonical chain plus the flexible moves (pause, switch, abandon). Validation runs first: dependency order, exercise conditions bound to verified milestones or named dates, and expiry. Rejected stages print with reasons and never reach a path.

The feasible set is every prefix of the validated chain plus each flexible move. A prefix's cost is the sum of its stage costs, priced only when every stage carries a deterministic cost; if any cost is missing the path total is UNKNOWN:

An unpriced path is not a zero - it is structural optionality: the path states what it preserves (the stages still open after it) and the terms required to price it. Stopping early avoids committing to later stages before their exercise conditions verify, and that avoided downside prints per path.

Identification strategy

Why the estimate supports the claimed meaning - and where the model refuses to claim more than the data carries.

• The no-dollars-without-terms rule is the identification stance: an option value invented from missing costs would be a number without a source, so unpriced paths surface as structure plus a required-terms list instead.
• Exercise conditions bind to verified corpus cells - a milestone that exists for this subject, or a named date - so an option's trigger is checkable, not narrative.
• Dependency-order validation keeps the chain physically meaningful: build cannot precede interconnect, and the rejection names the violated order.
• Abandon and switch stay visible by construction: the option to stop is part of the ranked set, not an afterthought.

Inputs and outputs

Calibration and gate evidence

Validation design

• Gate-verified paths: priced prefixes price deterministically, unpriced stages yield structure plus required terms, and invalid orders, unverifiable conditions, and expired stages are each rejected by their own gate.

Evidence on record

• Smoke gates at seal (9 m32-specific): unverifiable exercise condition rejected; missing costs yield structural optionality, never dollars; priced prefix path prices deterministically; the abandon path stays visible; required terms print for unpriced stages; invalid dependency order rejected; expired stage rejected, never proposed; determinism (identical input hash on re-run); audit row written for every run.

Gates at seal

• smoke: 9 m32 gates incl. order / condition / expiry rejections, structural-only unpriced paths, determinism + audit row (suite counts at seal per the build agent's seal report)
• sealed at c7c78e1 on atlas-nl-shock-redesign

Failure modes

The ways this model declines, degrades or goes UNKNOWN - and what it prints when it does.

• Stage out of dependency order, unverifiable exercise condition, or expired: rejected with the reason, never proposed.
• Missing stage costs anywhere in a prefix: that path's cost is UNKNOWN - structural optionality only.
• Flexible-path downside is path-dependent and prints UNKNOWN without terms; it is never priced by assumption.

Sensitivity

• The canonical order is the structure: resequencing stages changes which prefixes are feasible at all, which is why order violations reject rather than warn.
• A single unpriced early stage pushes every longer prefix into structural-only - the required-terms list shows exactly which cost unlocks which path.