Dynamic Model Of Venture Capital Entry And Exit Decisions Considering Unexpected Event

Venture capital,as a form of capital that invests mainly in high-risk,high-tech innovative start-ups,plays an important role in helping start-ups solve problems such as financing difficulties.The entry decision of venture capital involves the evaluation of the value of exit options,so it is necessary to study the entry decision and exit decision of venture capital in a unified framework in order to achieve value-added and liquidity.Long-term empirical studies have shown that startups may be affected by unexpected events and irregular jumps in relevant economic variables,which can cause significant deviations in the calculation of venture capital option values if such jumps cannot be modeled by a suitable stochastic process.Therefore,this thesis integrates the theories and methods of real options,stochastic processes and stochastic optimization to investigate the following two problems: first,assuming that the product prices of venture firms obey the jump diffusion model with negative constant jump amplitude to explore the decision problem of venture capital entry and IPO exit from venture firms under the influence of unexpected events;second,assuming that the asset values of venture firms obey the double-exponential jump diffusion model to explore the decision problem of venture capital entry and M&A exit from startups under the influence of unexpected events.The main findings of the study are as follows.Firstly,considering the shock of adverse contingencies,assuming that the product price of the venture firm obeys the jump diffusion model with negative constant jump amplitude,calculating the output of the firm by the Cobb Douglas production function,and introducing the variables and parameters related to the non-capital appreciation services of venture capitalists in the output function of the firm,reassessing the value of venture capital options,and studying the entry and exit of venture capital under the expectation of IPO exit decision problem.The study shows that: when the public market interest rate is lower than the private market interest rate,the entry and exit decisions of venture capital are dynamically related,and the larger the public market interest rate,the later the entry and exit timing of venture capital;the larger the average arrival rate of adverse contingencies and the average downward jump in product prices,the earlier the entry and exit timing of venture capital and the smaller the amount invested;the output elasticity coefficient of non-capital appreciation services The greater the output elasticity coefficient of non-capital appreciation services,the more bargaining advantage venture capitalists have,the later the timing of entry,and the lesser the amount invested.Secondly,considering that the venture firm may encounter favorable or undesirable contingencies during the investment period and assuming that the venture firm’s asset value obeys a double-exponential jump diffusion process,we study the entry and exit decisions of venture capital under M&A exit expectations;and compare the decisions under the two cases of exit without time limit and with time limit.It is found that: the investment horizon setting makes venture capital enter earlier and exit later,and venture capitalists receive less optimal equity,compared with the exit without time constraints case;venture capital enters and exits later when both the probability and magnitude of the sudden event jump downward are greater than both the probability and magnitude of the sudden event jump upward,compared with the case when both the probability and magnitude of the sudden event jump upward are greater than both the sudden event jump downward;the sudden event The larger the average arrival rate and the average magnitude of the jump in firm asset value,the later the entry and exit of venture capital,and the less optimal equity the venture capitalist receives when the exit is time-constrained.