Research On The Application Of Real Option In Investment Decision-making Based On Interval Analysis

In recent years, enterprise management environment has changed largely due to globalization, informatization, privatization, the relaxation of government control, the evolution of the technology market, and the frequent changes of the industrial structure. The environments have changed from a stable, predictable one to a complex and mixed dynamic one. In this case, it is rather difficult for decision makers to make correct decisions. Traditional investment decision-making method have two main disadvantages. Real option in investment decision-making based on interval analysis can well make up for this two disadvantages and have been widely used in the investment decision-making. This is the significance of this research.This paper has mainly focused on the following research work.Firstly, expounds the traditional decision-making method, and make analysis the two defects. That is:①Traditional method make estimation of the future cash flow based on the existing resources. While in the conditions of uncertainty, accurate prediction is almost impossible.②Traditional method requires that all future investment decision are made regardless of the elastic of decision-making and management. The real options thought that fully embodies the elastic has been introduced, which has solved the second insufficient. To solve the first shortage, the interval analysis method and the real option method are combined. The uncertain variables in the future are expressed as the interval. Then the real option pricing model based on interval analysis has been established, and the general analysis and steps of the method has been summarized. Finally, ideas and procedures of real options pricing have been studied and analyzed, and the distribution function of options has been gained based on Black-Scholes formula. Meanwhile, conclusions deduced from random simulation method and fuzzy real option methods have been compared with the real option method.The results of the study show that the real option pricing model based on interval analysis is practical and effective, and has a good application value in the investment decision-making.