Application Of Real Option Approach In Investment Decision Of Real Estate Development

Mainly discussed in this thesis are how modern real estate development enterprises apply the new investment decision approach, namely, the real option approach to their projects.The real option approach is the forefront in current investment decision research field. Presently, there is much research on the real option approach theory. However, the research on the application of the method in companies is quite limited, and it is the same for the investment decision field of the real estate development. This thesis will make up the shortage in the aspect and offer guidance for the investment decision practices.In this thesis, the research work is developed by surrounding the questions why the investment decision approach of real estate development projects needs innovation and how to innovate. This thesis is divided into five chapters.In the first chapter -the instruction, chiefly discussed are the limitations of traditional investment decision approach in real estate development, then the necessity of innovation under the uncertain condition and the superiority of real option approach from the concept of information economics. Finally the research train of thoughts and method is presented.In the second chapter, based on the real estate development projects, the basic concept of real option approach is firstly introduced, and then the two basic rated model of real option is deduced by the comparison of real option and finance option before the general frame of the application in decision of project investment is built.In the third chapter, the option characteristics and three common option problems of the investment decision of real estate development are analyzed in details. And the basic frame of the application of real option approach in the decision is built.The fourth chapter discusses the case of option to staged investment, option to deter investment and option to switch use.The last chapter mainly illuminates the research work, points out some issues needed to pay attention and prospects the trends of the real option approach in the future research.