Analyzing Multinational Corporation's Sale Decision Under Two Models Of Exchange Rate

Today, international trade market changed acutely, the production and sale decisions of multinational corporation become the key factor in scrabbling for international market. The capital flow in the international trade market exits market risk, credit risk, liquidity risk, operation risk, law risk and so on. The most important one is the uncertainty of exchange rate in the international market, so it is crucial to evaluate the value of the sale decision under exchange rate uncertainty and the range of the strike exchange rate. We should adopt a complex and scientific way to establish efficient models in evaluating the value of the corporation s sale decision.The real option method which is applied widely in recent years, can easily capture the flexibility value and investment opportunity in management under uncertainty. Compared the flexibility in sale decision with the choice in option, we can use the method of option to evaluate the value of sale decision, and then obtain the strike exchange rate range.In this paper, we consider sale decision. Firstly, we adopt Dynamic Programming and random process technique to evaluate the value of sale decision when the exchange rate obey Geometric Brownian Motion. Then, we fetch in regression parameter to form Omstein-Uhlenbeck Process, and evaluate the value of sale decision when the exchange rate obey Ornstein-Uhlenbeck Process. Combining the method of real option, compared it with the domestic sale decision, we can obtain the sale decision value added of flexibility. According the value, we can decide whether we should execute the decision of sale transfered, and also get the strike exchange rate range. This way is instead of traditional B-S formula, it is a simple way to evaluate and analyse the value of real option under uncertainty. While exchange rate fluctuate frequently, this method provide new idea for the decision maker of the multinational corporation, also it offer convenient operation for the manager of the multinational corporation.