The Analysis Of Pricing Model Of Real Option About Defer To Development

If the firm is going to invest in a new project, much uncertainy will be faced such as the product's price and the government's action. All these can make an important impact on the decision of investment, therefore, The orthodox theory of investment is weak under such circumstances especially during the vertiginous market's today. Firms should take more flexible strategy if they face the risk investment and make the decision of investment when they get more information about the investment.This paper introduces option method to the project investment and studies an important investment:option to defer development. In the first part of the paper, we assume the condition of no time limition and set up the decision framework of single stage's project investment and then we analyse the impact of four factors of the market on the decison. Secondly, we extent the condition of single stage's investment to multi-stages and analyse the decision condition on every stage and draw an important result: The decision of multi-stage's invesment depend on the decison of the first stage. In conditon, two appropriate process which fit in with the material conditions are taken into account such as Jump process and Mean-reverting process. Besides all above, we set up the decision framework of multi-cash flows.The above is about the condition of no time limitation and we expand the condition to time limitation. Because of the time factor, the decision of analysis investment becomes very complex. Just like the method of researching single stage, we firstly set up the decision framework and then make analysis of the optimal investment bonundary and draw some conclusion about it such as the monotony property of the optimal investment boundary and it fit in with the Volterra equation. In the last of the paper, we attampt to use the implicit difference method to plot the graphic of the optimal investment boundary.