The Theory Of Real Option And Its Applied Research

Investment decision is one of the most parts in a financial management of acorporation.Recently,with the rapid development and fierce competition,theuncertainty faced to a corporation is more and more complicated and this makes acorporation bear much risk.How to control risk and evaluate the value of aninvestment project is an important content in financial management.The traditionalmethod named NPV evaluates the risk and proceeds of a project from the angle ofstatic state,this method tends to ignore the irreversibility of an investment and theflexibility of decision-makers.So it can not evaluate the value correctly and lead to afalse conclusion.Taking the theory of option to the investment field and looking at thechance as an option,this is the concept of real option.Looking at it from thismanner ,you can understand the relationship of uncertainty,risk and proceeds.Theresearch includes three parts.The whole structure of the thesis is as the following:The first part, Chapter 1, is an introduction of investment theory.It mainlydemonstrates the shortcomings of traditional NPV method and presents the concept,principium and classification of real option.The second part, including Chapter 2, 3 and 4, is the study on real optionmodel.Chapter 2 overviews the model on option price-making. To draw comparisonsbetween the financial opition and real option, I mainly illuminate the modification onthe option model.Chapter 3, based on the analysis of the above chapter, mainlyintroduces the method of price-making in the condition of monopoly.At the same time,I also illustrate the model on entry,exit and mothballed state.Chapter 4 is the study ofgame theory in the frame of real option.I analyse the behaviour of corporation on thecondition of oligopolistic competition.It is a study of the model of game option anddistinguishes pure strategy and mixed strategy.The third part, Chapter 5, induces the parameter-estimating of real option. I mainlyilluminate the method about how to estimate the volatility and convenient yield. Atlast, I make an empirical research.At the end of the thesis, I demonstrate significance and suggestions for the applicationof real option in our country. In addition, conclusion and prospects to future researchare given.