The Real Options Model Of Item's Investment And Its Application

Because traditional evaluation methods invalidate the investment choice under uncertainty, the researches on real options emerge as the times require. Nowadays, the real option method has already become an important tool in the fields of enterprises value evaluation, strategy investment management, investment decision, corporation merger and acquisition and so on.The part of this text introduction and the second chapter generally introduce the conception, elements, context, recent researches, the basic knowledge and theoretical methods of real options.At the third chapter of this article extend the single-stage investment pricing model of real options at the condition of no expiration date, and obtain the optimal investment critical prices and the value of investment opportunity of every stage under incomplete information.Contraposing several pricing models in the financial options, the fourth chapter uses a revised net present value model based on real option pricing to analyze the feasibility of project investment decisions. The model based on the Geske's compound European call options pricing equation is also proposed to analyze the influence of investment proportions upon the item's value.