Real Options Theory Research And Application In The Company Decision

Venture investment comes into China from the mid-80s. And it accelerates development since 1990s. Evaluating is required to venture investment. Most investors are still using the traditional method to do it. But there are fatal flaw in it. Real options theory is the development and improvement of traditional method. It brings the financial option pricing model into real option pricing, which is a good evaluation of the operating flexibility value of a project. However, in the traditional method of real options there was an investor in the project alone. In the real market conditions, the absolute monopoly is being broken. Often there are multiple investors have the project investment rights. So the game theory was introduced to the real option approach. But all the theoretical discourse now, full of complex mathematical formulas, is not practical.The article improves the imperfection method. It has applied the theory of options of binary tree method. The types of real options in the main consideration for expansion option, shrinkage option and abandon option. Another innovation of this paper is combining with a game theory model that in the expansion option and shrinkage option part, considering the competition among investors, making this part more reasonable. This article will be based on game theory, which applied to real options specific modeling process to build a more complete model of real options.Firstly, the article describes the background, significance, the main content of this study and research ideas of the theory. Secondly, the article introduces the two basic theory:game theory and real option theory; And it introduces general framework of the option game and analyze the status of research at home and abroad. Thirdly, mainly discusses how to use the real option to evaluate the worth of company with the Cournot game and relevant methods. Finally, the article mainly used the method to evaluate the project options value, and in the end are summarized and prospects.Research result shows that the real option method is more positive and optimistic than the traditional method. It fully estimated the value of the investment project. The reasonable consideration of uncertainty provides us a feasible method of new ideas. The introduction of game theory makes this method more scientific and reasonable. The new model has important significance and application value to venture investment decision-making.