Research On The Impact Of Volatility And Value In Real Option On Telecommunication Investment

As the social and economic environment become increasingly complex, value decision of an investment project needs to be improved from both the aspect of risk management and adaptability to the changes of the decision with the severe competition in the market. The traditional DCF method is unsupportable to flexible management of project decision with uncertainty, due to its limitations in calculating financial indicators based on the certain cash flow. The first option pricing model is developed based on financial pricing theory, parameters of which can be drew from the historical data of corresponding stocks in the capital market. The above model is against the uncertainty of future investment, which can fill the defect of DCF method theoretically. However, when refers to the real investment area, it is an important problem to determine the parameters of the model, which can influence the application effect in the field of real investment. There are a large number of domestic and international scholars who study the application of real option in investment decision. And the common methods they use to ascertain the parameters difficult to calculate (such as volatility) are experience judgment, stochastic simulation etc. However, there are a few limitations in the application and extension of real option in decision making of investment projects by ascertaining the parameters in these ways, because the calculation results cannot fully reflect the impact of decision making on the value of projects.In this disertation, volatility is measured in a new method different from traditional experience judgment and stochastic simulation, which is from a new perspective based on a practical decision making process, influencing factors and variations of projects, then is the calculation on the value of real options. There are many differences in the mechanisms and processes of decision making of investment projects in varieties of industries, so a telecommunication investment project is chose as the empirical case in this paper. The life cycle process and key parts in the investment decision of a telecommunication service are carding first. Next, the influence factors and mechanisms in the process of project operation and decision making are analyzed from both the inside and outside aspects. Then, a complete telecommunication service investment decision making system, which chooses cash flow value of life cycle stages as outputs, is established based on a system dynamic model. On this basis, get project decision process and value considering the changes of various uncertain factors in the decision making system through simulation. Measuring volatility and the value of real options through changes of the values.This paper has researched a decision making system based on basic data of MMS service, and simulated according to the possible uncertainty and enterprise's practical methods of identifying and dealing with different situations, to calculate volatility and option value of MMS service. This paper also has done an empirical research on sensitivity analysis as an extension of model analysis.The main contributions and innovations of this dissertation are as follows:1?Come up with the idea of measuring volatility based on uncertain factors and changes of real value of a project, which is different from the traditional methods on historical data basis and experience judgment, and make the value of volatility more identical with its meaning in real option pricing model;2?Choose a telecommunication service as a study case, card the life cycle decision process of telecommunication service investment, and identify key steps, criteria, influence factors and the mechanism of each stage. And establish a system dynamics model on real option investment decision of a telecommunication investment project.3?Simulate and validate the above model based on real data and investment process of a MMS project in a branch company of CMCC. And measure volatility and the real option value of MMS investment project according to the calculation results of the model. Through comparison of the real option value and traditional NPV value, further verify the improvement and optimization to investment decision of the system dynamics model on real option investment decision.4?Design the sensitivity analysis method and perform a empirical research on basis of the above real option system dynamics model. Meanwhile, given to the variety of uncertain factors in investment projects, an extension analysis of the model designing is also developed.