Real Options And Its Application Study

The standard methods of DCF and NPV, which are extensively used nowadays, can't make managerial agility quantitative and can't strengthen the capacity of company to invest. Real option can make up the above. So it is in great need to do research in the method of estimating real option and summary its practices.Real option is an option to deal with real assets without compulsory. It has been around twenty years since researchers began to work over real option. Researchers abroad have come into application phase, while we awfully start to study it in china. Application of real option still hasn't come out in china.There are eight types of real option, such as option of deferring investment, of periodical investment, of expanding, of shrinking, of ceasing, of abjuration, of conversion and of increasing of company. The marked assets of real option is not financial assets but real assets, which determines that the characters of real option are different from those of financial options in such fields as non-monopolization, non-exchanging, pre-occupation, conjunction and initiative agility of owners of real option.In so far as the pricing of real option, if normal managers use Black-Scholes model to estimate the value of real option, complicated processes of modeling and operating can be avoided.Real option is more efficient in asset budget than the method of DCF and NPV. It is helpful in deciding the tactic of investment, the opportunity of investment and the method of investment.Following this, we discuss several cases of practical investment of companies by using real option.There are four parts of this thesis:First, the author summarizes the real option, by introducing option, then inducting the concept of real option. By analysis between real option and financial option, the author point out that real option is better than traditional method of decision-making.Secondly, the author introduces the model of pricing. On the basis of understanding the model of pricing, one can correctly apply real option in practice.Thirdly, the author set forth the application of real option. By identifying, separating and measuring the real option in venture investment, one can get the combination of real option in every phase of venture investment. Then we can use black-scholes model to calculate the price of real option.Last but not least, the author point out several questions in the research of real option. Then the thesis sums up the real significance of real option.