The Theory Of Real-option-pricing And The Application On The Valuation Of Capital Venture

Real option approach is rising in recent years. We can value the project of management flexibility and strategy growth by real option approach. That the systemic research on the pricing theories and models of real options has not only important theoretical and learned value, but also significant meaning for evaluating multiple flexible values in the investment and advancing veracity of evaluating the investment. Since the option—pricing method is applied in the field of project investment, the studying of real option is in the ascendant. Until now, a rigor theory system is to be formed. This paper carries up the evolution of option theory, synthesizes the inner idea and theory foundation, summarizes the assumptions, modeling approaches and classification of real option. After identifying and systematizing the current literature, a roadmap for future studying is discussed.We introduce concept, species, application process, calculation approach and application in this paper. Professor Stewart Myers said that real option endow investors the rights of acquire or sell a real asset or invest plan by certain price in future. Trigeorgis consider that real options include growth option, defer option, switch scale option, abandon option and switch option. Martha Amrarn and Nalin Kulatilake believe that the application process of real option include designing the proper frame, using the option pricing model, analyzing the result and designing second frame if necessary. The calculation approaches consist partial differential equation, dynamic programming approach and simulations. With the development of option pricing theory, we can use real option theory in broader domain.Basing on the venture capital stage feature, we assume that a venture capital has two types of investment-staged and lump-sum financing. The project of staged financing has compound growth option; the project of lump-sum financing has simple growth option. When the volatility is constant, we calculate the simple growth option by Black-Scholes equation, and calculate the compound growth option by Geske equation. We derived generalized versions of their equations so that options with multiple volatilities can be evaluated.The decision process of venture capital is one by multi-stage analysis and...