Research On The Decision Methodology Of Venture Capital Based On Real Options

This paper is composed of two parts. In the first part,the author presents the theories of venture capital and real options. The second part deals with the pricing models of various venture capital decisions based on contingent claim analysis. Firstly,started from the conception,characteristics,system construction and operating process,the author studies deeply the life-cycle theory on venture enterprise and venture capital. Secondly,based on the description of traditional evaluation methods and real option pricing and the comparison with the two parts,it is induced that venture capital contains much option characteristics,and real option pricing is more advance in venture capital decision. Thirdly,from the analyze above,the writer presents three pricing models of real option of venture capital,which are the pricing models of single and compound real options of one-stage venture capital decision,and that of compound real options of multi-stage venture capital decisions. By the application in makeup model and comparison with the DCF method,the writer concludes that the real option pricing is more scientific and available than the DCF methods in venture capital decision. At last,the writer talks about the defect of the models,and previews the development of real options-option-game theory.In the paper,the writer uses various kinds of analysis methods,such as dynamic and static analysis,system and sectional analysis,comparison and integrative analysis,quantitative and qualitative analysis,to demonstrate writer's opinions and conclusions systematically.By the research of the paper,the writer hopes to enrich the theory of venture capital,especially to raise some new conceptions and thinking of venture capital decision based on real options. In the same time,the writer hopes that the new models (especial the pricing models of multi-stage decisions) could be useful to the venture capital enterprise' operation,investment decision and management,and to contribute for the development of venture capital theory and venture capital practice of China.