Methods For Assessing The Value Of Venture Capital By Options

The venture capital is an important safeguard to help start–up companies to grow stronger. It is an incubator and a booster for the development of high-tech industry.In recent years, domestic and foreign scholars have made a lot of research work on venture capital. However, the research on the valuation method of risk investment is limited. At present, the most mature, the most widely used method is Discounted Cash Flow(DCF) method. This method does not consider the uncertainty of the risk investment and flexibility of investors. By using this method, there exists big deviations in the valuation, which can not guide the practice of investment management.At the end of the twentieth century, the theory of real option was put forward,which takes into account of the uncertainty and the value of the option in venture capital. The project valuation will be more objective and accurate by using this method. With these tools as Binomial Tree Model, Trinomial Tree Model and B-S Model, etc, we can apply the real option theory effectively to the practice of venture capital. According to previous research results, this dissertation qualitatively analyzes the relationship and characteristics of the three models and constructs a thinking framework of valuation for three option models by investment examples. Finally, the efficiency and accuracy of Binomial Tree Model, Trinomial Tree Model are compared and analyzed by using quantitative calculations, which summarizes the special advantages of Trinomial Tree Model.