The Application Study Of Real Option In The Venture Investment Decision

The venture capital plays the role which could not be substituted in the high tech enterprise's development as a kind of special system of financing and investment. However, in the concrete practice process, the high risk, high uncertainty and the low success ratio in the high and new technology developing process enables many venture capital organizations to be extremely careful in the investment decision-making. Therefore, how to appraise scientifically the venture project value, evade or reduce the investment risk and enhance the investment success ratio has already become the problem to be solved. The conventional appraisal method is only suitable with the conventional project appraisal, but is not suitable extremely with the enormous uncertainty and unstable profit project appraisal. Introducing the real option method into the venture capital project decision-making provides the new thoughts for the venture capital management and the scientific policy-making and it has certain innovation significance. First of all, the paper analyzes the characteristic of venture investment project, then compares the conditional investment decision method with the real option analysis, obtains its linear explicit solution of compound option evaluation model according to the multistage trait of venture investment project and analyzes the case at last.There are six parts in the paper. Part 1 introduces the study background, significance and content of the paper, shows the basic frame. Part 2 analyses the connotation, characteristic, type and the classical pricing model of real option. Part 3 generalizes the concept and characteristic of venture investment, reviews the traditional investment evaluation method, points its limitation and the necessity to establish the new evaluation method. Part 4 analyses the real option characteristic of venture investment and obtains its similar linear explicit solution of compound option evaluation model to the B-S and Geske model. Part 5 takes 3G project as an example and analyzes venture investment decision in real option method, and compares the conclusion with NPV model. The last part is the conclusion of the whole paper.