Option Games With Jumps Under Oligopoly In Finite Investment Project Life

The traditional DCF methods for firm valuation exist the defects of the big difference between model assumption and the reality, which make the investors underestimate the value of the firms, and the traditional DCF methods can not estimate the value of the firms with much flexibility. This paper mainly analyzed two oligopoly firms with real option methods.This paper focused on option games with jumps under oligopoly in finite investment project life. This paper assumed market demands following geometric Brownian motion with jumps, we build the model with dynamic programming methods. It solved investment threshold of the firms and value of the firms in different competitive environment. It used numerical example and Matlab software to verify the results.