The Research On Investment Decision Method Based On Option

This text, aims for the changeable management environment and uncertainty of project investment which enterprises face and combines the international and domestic current study about the investment decision method of the project. It has analyzed the defects of the traditional method of investment decision existed in risk and uncertainty appraising. These defects assume ignoring the value of options in project but the value is important component. At the same time compared with the traditional methods, the author points out: option method of investment decision has obvious advantage on evaluating the flexibility and option in project. It has been emphasized that the option value is important to investor's decision. And then, the paper accounts the relationship between financial option and investment real option and shows the differentiation on calculating the project value from the traditional method of investment decision. On the basis of the new pricing model of investment decision, the author summarizes the practical conditions and using steps of the option method. After summarizing theoretically, the article uses a case of a enterprise and explains how to use Black-Scholes model and BOPM model to aid investment decision. Not only analyzing the basic option model of investment decision for single enterprise, the article introduces the popular game theoretic option and points out competition will erode the option value, so when the investors make decision, they can't adopt the general basic option method for single enterprise's investment decision. On this case, the preemption changes the investment start point and the optimal decision should adapt according this. Important content of the latter half of the article has discussion the original reason why option method does not generally been accepted by enterprises at present. To this point, the authorclassifies the investment projects three times according to the characteristics of competition situation and capital investment in different phased. The contribution of this paper is to build an investment framework and propose the suitable evaluation models for every part of the framework. The framework attempts to guide the investors to a clear way and bring them great convenience when face complicated option problems in project investment. Because of this, it breaks through the situation that option models are distracted and it will push the option method widely used in reality. At last, considering that some important parameters will have great influence on project evaluation, the paper explained how to predict these important parameters in order to improve the capability to control the risk of decision-making process.