Real Options And Its Application In Venture Capital's Value Evaluation

In the era of the rapid development of science and technology, scienceleads the economy, so venture capital action is becoming more and morepopular, and venture capital projects are facing more and more uncertainty andrisk. Whereas, the managerial flexibility and strategic adaptability contained inthe venture capital are representing its inarguable value. Traditional investmentdecision methods can't make the flexible adjustment to and perform theeffective management of the coming change. Thus the research on theevaluation methods with managerial flexibility is becoming the key tosuccessful utilizing of the coming investment opportunity and adoption ofeffective competitive strategy in time for venture capital. A real optionapproach that borrows ideas from financial options theory offers a freshperspective.Real options method views the investment opportunity of managerialflexibility as a series of options that can achieve returns on investment. It greatly breaks through the limitation and manacles of the traditionalinvestment evaluation, adapting well to the new investment environmentcharacterized by uncertainty and risk, and offering a revolutionary solution toquantify the managerial flexibility and strategic adaptability. The introductionof the real options approach in venture capital decision can provide a new ideaof venture capital management and scientific decision, which has certaininnovative meanings.On the purpose of promoting the development of venture capital, theresearch work is carried out around the application in the venture capitaldecision of real options. The paper mainly includes the following content and achievements. Firstly, the paper expounds the system structure and decision-making program of venture capital, and discusses the existing major problem in the venture capital operation based on the analysis of the development significance and current status of the venture capital of our country. Secondly, by the analysis of the high risk,high return,future uncertainty and the life period in the growing process, the limitation of the tradition investment decision method used in the decision of venture project is pointed out. Thirdly, through the discuss of the essential concept, basic feature and common option pricing theory, the common idea of establishing the option-based evaluation methods is summarized, and the applied frame of real option is constructed. Finally, on the basis of the analysis of the value constitution of the real options method in the venture capital project, the multistage and multimode compound real options is simulated, and the design of a compound model based on the multistage and triple tree is tried.