On The Pricing Method Of Real Option With Uncertain Parameters

Real option is the development of financial option in the real assets areas, that overcomes the difficulties in evaluating the investment using traditional methods(such as DCF), and also the real option method considers the value containing in the flexibility. At present, most of the method of real option pricing is developed underling the idea of financial option. But the different of the two is obvious. So most of the extant methods of real option pricing have bugs and limitations.The focus of the paper is signal option pricing under the condition of uncertain parameter. The paper begins with discussing the different of real option and financial option, and claims that the stochastic factor must be considering in real option pricing. So the main body of the paper discusses the methods and models of signal real option pricing under the condition of uncertain parameters: the value of underlining assets, non-risk interest rate, expenditure of execute. The paper is composed by six parts, the first part introduces the research background and the frame of the paper; the second summarizes the existed theory of the real option pricing and points out the main different between financial option pricing and real option pricing. The third charter discusses the real option pricing model when the underlining assets is non-exchanged using the idea of discomposing. The forth part uses the theory of structure of interest rate to deduce the model of new real option pricing: at first we use mean-reverting process to depict the structure of interest rate and then modify the traditional real option pricing model. The fifth part considers the uncertain of expenditure of executing of the option and deems it must be a stochastic factor. The paper researches it's behaving and deduces the pricing models of European option and American option. The last charter is the conclusion of the paper the future focus of real option pricing research.This paper researches the uncertain parameters which are stochastic factor in real option pricing, and uses the theory of stochastic process to characterize them, then deduces the real option pricing model. The idea gives a new method in evaluating investment and makes real option more useful and practical; also it establishes the foundation of further research of real option pricing considering competitive and multiple factor.