Cross-border Investment Decisions In The Exchange Rate Under Uncertainty Study

With the development of economics globalization and finance predomination, global firms play a more and more important role in the global economy. After her entry into WTO, china faces the competition and challenge from foreign enterprises. Meanwhile, domestic enterprises also have to compete in the world. The change of exchange rate affects a lot on the profits of global firms. At present, most of the countries in the world adopt floating exchange rate, that is market decides the exchangerate, therefore, foreign companies in China and Chinese companies in abroad would take exchange rate into consideration。Real option is a series of non-financial rights adopted by investors in the process. Since it takes value of investigation time and management flexibility and value of reducing uncertain information into consideration, it could make a scientific evaluation on the investigation program. For that reason, it has become an important strategic approachOn the basis of present studies on real option, this paper focuses on the adventure and characteristics of option under the condition of uncertain exchange rate. Taking exchange rate as the only random variable, the paper establishes the model of real option. It analyzes the effect of exchange rate fluctuating on the profits of global firms. Revising the transferring cost, the critical value of entry (investment) and exit (divestment) are computing out. It makes use of MATLAB to get thenumerical results of the model and analysis the effect of every factor in the model. The paper is significant for enterprises which want to invest internationally.