An Investment Contract With The Double-barrier Option Features

Venture investment contract is an agreement in principle on investing in the future exchanges between venture capitalists and venture entrepreneurs. The design of reasonable venture investment contracts, ensures the profits of both the venture capitalists and the entrepreneurs, stimulates their joint efforts and cooperation effectively, and promotes the developments of venture enterprises to achieve a win-win situation.Based on an analyzing of effect of the venture investments to economy, and of the significant role that financial instruments play in venture capital investments, this thesis presents a design of venture investment contract which admits both the option characteristic and the bond characteristic, and which is restricted by a double-barrier. The designed contract is a bilateral incentive and a bilateral restraint to both the venture capitalists and venture entrepreneurs. The subject enhances not only the control ability of the venture entrepreneurs to their business, but also the ability of transferring the risks. Meanwhile, the design guarantees, to a certain extent, the fairness of the agreement on both sides. Under the hypothesis that the financial market is complete, and that the change of values of venture enterprises follows a geometric Brownian motion condition, we deduce the relationship between the key parameters of the contract, by using the risk-neutral pricing method and by evaluating the contract.