The Application Of Real Options To Project Investment

In a long time, Discounted Cash Flow (DCF) or Net Present Value (NPV) is a standard method for financial evaluation or analyze enterprise investment projects, but that two methods have their certain limitation. Since Options Pricing Theory applied in real investment area, the research of real options is in the ascendant.This paper review the progress of options theory, synthesized its core thought and rationale, summed up fundamental hypothesis; application logic; characteristic; classification and modeling method, analyzed the dissimilarity between real options analysis and other traditional analytical methods, and has brought forward suggestions on the thought and method for applying real options theory to resolve the actual problem on project management in the enterprises' investment activities.