Research On The Application Of Real Option On Venture Capital Decision Making

With the development of global economy, Innovative and High Technology Enterprises as emerging industy have been rapidly developing,and have become a pillar industry of the national economy development instead of traditional industry . Venture capital industry can provide abundant capital to the Innovative and High Technology Enterprises, so it plays a great role in a country's national economic development. Venture capital developed from Amercia and promote the American economy having a rapid development. Venture capital can make invester get huge profits but it also has high risk. So how to find an appropriate investment decision-making method become more and more important.At the end of the 20th century, Chinese experts began to pay close attention to the venture capital,and had done a lot of researches. The main research directions are the study of macro ,which are the definition,fetures, operation process, Way to withdraw funds of the venture investment.Some scholars focus on Evaluation of Risk Investment Decision, but most have stayed at the theoretical level, with little empirical research, and commonly used methods are the traditional investment decision making, such as discount cash flow , relative value assessment and EVA, etc. While, because they haven't considered the uncertainty and Flexible Administration, there is some limitation in the traditional methods.The paper argues that the introduction of real options method into venture investment will reflect the uncertainty and Flexible Administration.It can help To make up for the shortcomings of traditional decision making, and more realistic. In this paper, based on the works previously, Based on a great many of statistic data. , this paper adopts analytical way combining theoretic analysis with demonstrative study, combining quantitative identification with qualitative analysis to deep and systemic investigate the comparative advantage of real option. For the uncertainty of Venture Capital, I use Monte Carlo simulation analyze the parameters in the Real option pricing model, so can get the value of options more accurately and make investment decision wisely.