Study On Building And Application Of Fuzzy Real Option Decision-making Model For Real Estate Development

There are many uncertainties in the process of real estate development. How to make the decision under uncertainty is the matter that developers care about. Real option is the right but not the obligation held by an investor to take actions when making decisions under uncertainty. It can supplement and rectify the ignorance of the value of flexibility by traditional investment decision-making method. Overseas, real option research has already achieved considerable success, especially in the area of real estate development; scholars have established many real option models on real estate development. In China, research on real option started a little late, and is still at the stage of theory introduction, scholars just tend to emphasize the option nature of the land,but little of them has done in-depth study on foreign real option models and most of them directly use financial option pricing model (e.g. B-S model) for pricing options for real estate development. These methods all based on the assumption that the input value, such as the present value of expected income and cost cash flow is certainty value, which is unconvincing due to the high degree of uncertainty of actual projects as well as the high complexity of domestic real estate market.In this article we make real estate investment decision-making in uncertain environment as research object, fuzzy mathematics theory and real option theory as theoretical basis, for the ambiguity nature of project investment costs and the estimate value of the expected value, we introduced fuzzy numbers to establish a fuzzy real option pricing model for real estate development project (that is, the decision-making model), assuming that the present value of cash flow of expected income and cost, the risk-free interest rate are fuzzy numbers or fuzzy variables, to make improvement for the original B-S formula, thus we can make quantitatively analyze and identify the value of opportunities and management flexibility, and then the empirical analysis is conducted, to provide decision-makers with a more reliable decision support, and has larger theoretical and practical value.