Applied Research On Decision Of Real Estate Project Investment Based On Real Option Approach

The real estate industry began in the early eighty century. In recent years of rapid development it has made great achievements, has become the economic growth engine and a pillar industry of the national economy. However, the real estate industry has high capital share, poor mobility, and be easily affected by the policy. It shows that the real estate industry contains high investment risk. Reviewed the development of real estate industry in recent years, such as "sales, credit limit" policy of macroscopical adjusting control emerge in an endless stream, which makse a great influence on each decision of the government, banks and real estate developers. In this context, many well-known real estate development enterprises such as Vanke, Poly are faced with capital, inventory, sales return pressure, slowing the pace of expansion. However, as a proverb says:"chance" may exists in "danger", the change of the market will promote real estate enterprises to move towards a more healthy direction, and with growing uncertainty of business environment the real estate development investment should be more scientific, more correct, in order to achieve the strategic goal of the enterprise.The real options method is a good tool in the uncertainty of project evaluation and investment decision analysis, and in foreign countries has been better applied in such as the development of natural resources, the high-tech industry investment and other areas. Based on the discussion of the application of the real option theory in investment decision-making of real estate development, this will provide a useful reference for investment decision-making of real estate development, and will promote real estate industry in the direction of healthy and steady development.This paper mainly includes the following seven sections:The first chapter is the introduction, which mainly elaborates the selected topic background, research significance, research content, research route, research methods and innovation.The second chapter is domestic and foreign literature review. This part mainly combs the latest theoretical achievements of the application of real option approach in investment decision-making, and then to review the domestic and foreign research achievements, indicating that the current study status and future direction of research and development.The third chapter is the theoretical foundation. In this part, it review of the options’connotation and analysis the options’value, and systematically summarizes the connotation of real options, types and the difference between financial options, and based on this, puts forward the application of real options thinking.The fourth chapter mainly analyzes the applicability of the real option method in real estate investment decision-maKing, and put forward the method of real option analysis route. It first analysis real estate development investment characteristics, and elaborates the real estate investment analysis factor. Secondly, the traditional investment decision method and real options method were compared, it analyzes the applicability of real options method, then come to the conclusion that the real options method analysis route.The fifth chapter and the sixth chapter is the core part of this paper, the theory of fuzzy mathematics is introduced mainly based on the B-S model, the B-S model was modified to better adapt to the real estate investment decision. Using trapezoidal fuzzy mathematics thought, it constructs the fuzzy real option model, and use specific cases to explain the application of real option model in China’s real estate development investment decision-making, and put forward the general idea and specific steps..The seventh chapter is the conclusion and prospects. It mainly introduces the research conclusion and the present research insufficient, and prospects the future research direction of real option.The main innovation is, comparatively analyzing the traditional real estate investment decision method and real options method, introducing the theory of fuzzy mathematics based on the B-S option pricing model, fuzzy correction, establishing the application program of real option theory in China’s real estate investment decision-making, and introducing the overall thinking and concrete steps.This paper also has many insufficients. The fuzzy real option model constructed can not be fully applicable to the real estate investment market with Chinese characteristics. Because of the government intervention, enterprises have a real option uncertainty.Followed by the difficulty in the determination of the model input variables, such as volatility determination, fuzzy number determination, and so on.