The Application Of Real Options In Development Of Coal Resources Investment Decision

According to the characteristics of the coal industry, investors can clearly see that the large investments, long cycles, risks of coal projects, need a flexible approach to their investment decision-making project assessments. In theory and in practice, there are many flaws and shortcomings of traditional coal development investment decision, often used net present value of the investment approach does not take the uncertainties into account. This paper uses the real options approach to conduct research on the coal resources development investment decision by literature studies, the combination of theoretical research and practical research. Concrete research work is as follows:1. It has carried on the systematic overall retrospect to the domestic and international research results about real option. It introduces and analyzes the real option theory on the basis of analyzing and appraising to the traditional investment methods systematically in detail. This paper has studied the value of the investment project again with the real option theory. It sums up the application area, step and analyzing frame of real option theory, and analyzes the insufficiency of the traditional investment decision on the basis of comparing with traditional coal resource investment decision, and proposes some improvement suggestions.2. The coal resource assets has characteristic of irreversibility and delayability. It studies the application procedure of real option in the coal resource investment decision of development and sets up the suitable model of coal project investment decision-coal resource assets value model. And the use of examples to the corresponding certification proves that the models can be used to further improve the accuracy of the valuation results. Such "added value" gives expression to the value of flexibilities that the coal enterprises have.3. It analyzes the main factors of interest rate changing and price fluctuating that influences the real option value of the coal resource. As the coal mine general operating is longer, the impact of the interest rate change on the coal resources asset options value is particularly prominent, and the coal prices are not always found by successive processes, the impact will be affected by a number of unusual events occurring leapfrog phenomenon. Combining the Chinese capital market characteristics, it builds the interest rate of random fluctuations model, and price change process is the assumption that coal products geometric Brownian motion and the appropriate mix of Poisson process, and extrapolates the coal resources assets valuation random model on the basis of it and determines the suitable parameters for the coal industry. And the use of examples to the corresponding certification proves that the models can be used to further improve the accuracy of the valuation results.