Research On The Passage Problem Of Decision-making Value In Real Option Pricing Method

The standard real option pricing method has provided an investment rule: there exists an optimal decision-making threshold; the firms have maked investment decision when the underlying state variable was greater than or equal to this threshold, otherwise, the firm will wait for investment continuously. The investment rule was provided in the view of the state varivable, if replaced by the point of view of time, the investment principle was the problem of the optimal time to invest, namely, the problem that the random first time the process reaches the fixed critical value starting from an initial position. As for the random first passage time, there were a lot of results in stochastic processes. The traditional real option studys have paid attention to the optimal decision threshold value only and have ignored the passage problem of this critical value, which were the fisrt passage time and the probability to passage the critical value. Make some optimal investing timing opportunity seemingly lost the meaning of guiding actual investment, the reason for this was that the waiting time was too long or the threshold value can't be reached at all. It was significative practically to research the passage problem of critical value by the fist passage time approach (FPT) and to verify the validity of the investment rule in the practical investing decision. The passage problem of critical value was investigated in three real option models of this paper. Firstly, a real option-pricing model of containing entry-exit decision was investigated in chapter 3, and then the paper discussed the passage problem of a pair of triggers that was determined by nonlinear equations. In comparative static analysis, the result showed that any costs increased the entry trigger of the idle firms and the investment and abandonment cost decreased the exit trigger of active firms different from the effecf of the variable cost on it.the influence of uncertainty on critical value, passage probability and expected first passage time was investigated in numerical analysis. The study showed that uncertainty increased the entry trigger of the idle firms and decreased the exit trigger of active firms, the average entry time decreased with uncertainty then increased with it but the exit time decreased with uncertainty all along. Secondly, in chapter 4, an option pring model with limited investing time was discussed, the paper analysed the validity of the real option investing rule, and then focued on the effects of the limited investing time on the investing threshold and the option value to invest when the limited investing time of real estate investment of our country was 2 years. The optimal investing rule and the ratio of the expected waiting time and the limited investing time were provided on the condition that the investor had the managerial flexibility of investing-waiting.the numerical example showed that the investor may wait to invest in real estate devolopment after waiting for 60 percent of the limited investing time of our country according to the real option investing rule. At last, the papaer discussed a real option model with stochastic conditions of both price and cost that are correlative by using the real option pricing technique in chapter 5, and then investigated the corporated problem of the optimal time to invest. The study showed that there exists option value in investment rules. In addition to, through being exploited the first passage time approach (FPT), the paper focued on the passage problem related to time to investing and pointed out that the less of the trigger is, the less the first average first time and the more probability to reach the the critical value.