The Application Of Monte Carlo Method In The Exit Decision Of Venture Capital

As a kind of high risk but high benefit investment, venture capital has been focused since born because of both the good economical and social benefit. Thought there are huge risks in any venture capital item, but the feature that multi-turns investment makes the investor could terminate the item when necessary to avoid more loss, or sell the item to get more benefit than holding it. So the method of deciding if and when an item needs terminate has become a highlight point in the venture capital field.This paper first introduces two typical methods for evaluating venture capital item: synthetic method and real option theory. On the basis of reading a lot of papers, the writer assures the advantage of real option theory in the evaluation of venture capital, and point out the short comings of the traditional calculations of whatever B-S model or Geske model. Because of endowed with some fixed value, the result of models could not reflect the fluctuation of venture capital and the multi factor sensitivity analysis is far from practical use because of high dimensionTo solve those problems, creatively, this paper brings up the idea that applicants Monte Carlo method in the evaluation based on real option theory. Monte Carlo method has a lot of advantages such as get rid of the curse of dimensions, effective in the uncertain problems. It could easily reflect the combined change of several factor. That combines the Monte Carlo method and real option theory makes the advantages of them together, and the evaluation could also become more accurate...