Real Options Approaches For Investments Under Uncertainty

To properly make projects appraisal, staged investments analysis & intangible assets pricing involved in investments under uncertainty, this thesis, based on the real options thinking, sets up the notion models employing the decision-making tree analysis and the mathematical models by relative comparison and cash-flow analysis. Cases are also included in the analyzing process. The main results are as the following.1. A comprehensive appraisal method is brought forward for projects under uncertainty. The growth option feature of these projects enables a division of all the factors including economic achievements into two groups--the advantageous and the disadvantageous. The options pricing mechanism is employed to evaluate the comprehensive effects of both sides, embodying the influence imposed by the hi-risk, hi-benefit characteristics of these projects on the comprehensive appraisal.2. A tri-stage investment-analyzing frame is constructed to realize an organic combo of the R&D, commercial startup and scale expansion during the uncertain investments and an interacting investment chain. The decision-making executive probability applied to the research frame can reflect both the serial and the parallel interdependencies of the real options. Since the project profits, the underlying assets, could become negative, a strategy of dividing the profits into the price and the cost is adopted to reduce the three uncertain factors to two. And then the stochastic partial differential equation is derived to satisfy the real options price that is induced by two underlying assets. The trigger time of decision-making is handled as random variables. After computing the expectation on the distribution function, the approximate solution can be got by employing numeric techniques to the target function that involves European option pricing formula.3.A systematic, innovative research is carried out on the evaluation methods of intangible assets, indicating the real options approaches based on the analysis of assets returns are the best solution.(1) The contingent payoffs implied in the seeds technology are analyzed from thestand of the price-taker and the price-maker respectively. Decision-making executive probabilities are used to simulate the effectiveness from the two decisions of "instant commercial investments" and "deferring the investments to the best time". Then the parallel and exclusive managerial flexibilities are valued to reflect the price of the seeds technology. In this way a clear and complete solution is put forward to the pricing of multi-phase evolving intangible assets under uncertainty. A new interpretation of successful R&D probability is also presented in this section.(2) The real-options thinking is introduced to the trade of intellectual property. The decision-making flexibilities implied in the exclusive publishing rights are depicted as the options to defer investments. A stochastic process of returns is constructed. The implicate solution to the price of the exclusive publishing rights is established after the dynamic duplication and the settlement of Black-Scholes equation. The numeric solution can be obtained by means of iteration.(3) Two typical investments decision-making flexibilities implied in the licenses are identified, namely the option of waiting to invest and the option of quitting for salvage value. The executive probabilities of contingent decision-making of commercial investments describe the serial interaction of real options. Two technical principles for constructing real options are also advanced in this section.