The Research On Decision-Making Of Venture Capital Based On Real Options

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. The evaluation of venture capital firm is the key of venture capital. But the different value character of venture capital firm with conventional enterprise makes that the application of conventional enterprise appraisal method is limited. So the evaluation of venture capital firm becomes a problem to be solved that restricts the development of venture capital. The goal of this paper is to solve the problem.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. 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 dimension.To solve those problems, 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 factors. That combines the Monte Carlo method and real option theory makes the advantages of them together, and the evaluation could also become more accurate.