Study On Real Estate Development Investment Decision Based On Real Option Approach

Option is a choice ,real option are right which have characters of option andexist in the real assets, it has been applied in many economy field widely, could helpcertain investment strategy,investment opportunity and investment technique . Itcould complement and revise classical evaluation methods for investment decisionsoverlooked the cost of management flexibility, when an investment stand alone theground evaluation, it is uneconomicial. Investor could invest during the marketbeneficial time, in order to make the future's latent income biggest or the loseminimum. The research to the real option approach has entered to extend the appliedstage on aboard , but local of the research is just start, The paper is a beneficialstudy towards the real option approach ,being used in real estate developmentInvestment.This pasper introduces the option to defer ,time-to-build option , option to alteroperating scale ,growth options , switch option and option to abandon and analyzes indetail eight properties of real estate development Investment decision and the natureof the real option ,bring up the applied views to the operation method of the realisticmeaning ,for example, the project development strategy,the united investment ,thedevelopment strategy,the project attornment strategy and the land stores strategy andso on. This paper discusses the cost valuation method of the investment opportunity,comparing with classical evaluation methods , illuminates the advantage of realoption in the investment strategy adjustment. Based on the principle of no-arbitrageequilibruium , a common method for real option pricing is analyzed and binomial treemodel is introduced in detail . This paper amplified by the derivative merchandisegenernic fixing price equation,the risk's adjustment and real option fixing priceformula of genernic differential equation. It demonstrates binomial tree model whichis suitable for real option pricing for that simple parameters, calculation method isobvious and credible, dawn the research conclusion which is suitable for real option'sfixing price. This paper takes an actual of real estate investment case , analyzed thereal option approach in the real estate to invest the applied process with indecision ,furthermore, using the real option approach, on account of the activeconfidence towards to indetermination factors, make the investor increase to makepolicy the quanlity with invest the income's important link.