| In recent years, China's real estate market is unpredictable. and house prices, mortgage interest rates fluctuate frequently. Coupled with the uncertainty of the real estate market, the risk of real estate investment increased sharply. There are many ways in real estate investment decisions, the net present value method (NPV method) and the internal rate of return method (IRR method) of Discounted cash flow techniques (DCF) may well be good ways. However, these traditional methods used for investment analysis is difficult to quantify the management flexibility and the capacity of the value of business investment which will easily lead to mistakes in decision-making, so it is not a scientific basis for decision-makers. Real estate investment decisions have many real options characteristics, the introduction of the real options approach to the real estate investment and development may maximize the use of the uncertainty in the investment process, expand investment opportunities, and improve the investment level of the real estate enterprises in the anti-risk capability and decision-making.Considering the expiration time of real option not determined, risk-free interest rate not static, and policy makers existing individual differences, then taking into account these factors, we use Cox models and the discount interest rate function to amend the original Black-Scholes option pricing model and get a new kind option pricing model based on the stochastic interest rates and inconsistent preference. We use the new model in the section behind.Generally, real estate investors in articles about real estate investments only involved real estate developers. However, according to the meaning of real estate investment, it should include more parties. In this paper, the real estate investment involves tripartite, that is, real estate developers, buyers, banks. First we analyze the risk of their own, then in accordance with the tripartite relationship among them, explain the point of view given from game theory and principal-agent theory. Combined with the characteristics of real options with real estate developers, buyers, banks, we suggest they how to make investment decision by the use of real options.Real estate developers, buyers, banks have close relationship among themselves. Real estate developers get loans from bank, buy the land, then develop it and sell the construction of housing to buyers, there exists much risk. Considering separately the process of pre-construction, construction period, sales period and the use of period, we analyze their different risk factors. Combined with some stage of the characteristics of real options, we use the Black-Scholes model and the binomial pricing model to deal with the uncertainty.Buyers get loans from banks, buy houses from the real estate developers. There exists much risk at this part. This paper analyzes the risks of purchasing pre-house, as well as the defaults risk of loan repayment because of changes in interest rates and change of house prices, loan defaults are divided into two forms-early repayment and default. From the perspective of game theory, we explain the acts of fraud of real estate developers. Considering a principal-agent relations between the purchaser and real estate developers we establish a model, and discuss what monitoring mode buyers should get to make real estate developers incentive to act in accordance with the contract. In accordance with the rules in China's real estate market, buyers must pay the deposit they after they elect their satisfactory house, which in fact has given buyers for some period of time in the future the right to choose (to pay the remainder of payments, or to give up the deposit). Whether the number of deposit is reasonable, this article analyzes it from the perspective of real options. In accordance with the existing provisions of our country, at the beginning, the buyers having applied for housing loans can have several repayment options, How to skillfully and reasonably use the options in interest rates for maximizing the benefits are an important part of the article, and a case study is given here.Banks make loans to home buyers and real estate developers to make profits, there exists much risk during this period, namely credit risk. This paper analyzes the sources of credit risk, takes into account the disadvantages the made by the default of home buyers - pay the bank loan in advance and then points out that the bank should give much punishment to manage effectively and control the risk of early repayment, and then maintain the stability of capital . For repayment in advance, we analyze the game between the buyers and the banks from the perspective of game theory. If commercial banks exert effective control on the options costs, the commercial banks may reduce the interest rate risk. Bank also has risk in loans assessment, too stern is not well - this may lose a number of high-quality customers, too loose is not well either - it will lead banks have more risk. Reasonable use of real options is a good way. Since this will avoid short-sighted, and then retain quality customers. Repayment in advance is a big problem for banks because it may disorder the use arrangements of funds. On the basis of the real options, how to set lending rates, and what penalty should be given for the repayment in advance in order to make most profit is an important content of this paper. On the assumption that interest rates are based on the Cox model, under the market-oriented interest rate we take into account banks' optimal loans interest rates and fine setting for dishonest borrowers.
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