Study On The Pricing Method Of Real Option

Real option which is one of the key issues in the research of finance engineering is very important to enforce flexibility of management decision. It is not only used in investment decision making but also in the whole chain of enterprise running such as production pricing, marketing, material and accessory supplying, and after-sale service, even in researching of macroeconomic. Therefore, it is significant to provide the reasonable pricing methods for real option.This dissertation makes researches on two features of real option.First ,when underlying asset is non-tradable real asset,the author divides the underlying asset into some tradable elements, such as labor force and production which can be traded in the market. Then the author regards these tradable elements as some underlying assets. Because the elements are tradable in the market, we assume that all the elements submit to Geometric Brownian Motion and we then employ the multi-asset option pricing formula to price real option. Besides, underlying assets are non-tradable and can't meet the risk-neutral valuation approach. At the same time, the formula, pricing on underlying assets driven by geometric fractional Brownian motion (Chen Jun-xia, Jian Ming, 2006), doesn't involve risk-neutral valuation approach. Therefore, the dissertation uses the formula to price the underlying assets which are non-tradable real option.Second, in the process of pricing real option in which decision-making of risk investment has been involved, investing circumstance is always vague. That is to say, the information we need is incomplete. In this dissertation, the incomplete information has been divided into two categories: 1) the valuation of underlying assets and investment cost are vague; 2) the up-factor and down-factor of underlying are vague. When the valuation of underlying assets and investment cost are vague, we treat the uncertain elements as fuzzy number or fuzzy variable, and then we obtain two kinds of completely new model pricing for real option using fuzzy set theory with B-S model and binomial model respectively. When the up-factor and down-factor of underlying are vague, we assume that both up-factor and down-factor are triangular fuzzy number. While pricing, we employ the method of judging of risk-neutral valuation approach. As a result, we derive the risk-neutral probability intervals and then obtain another pricing model for real option under vague circumstance. From the above, the dissertation obtains all the methods of real option under each circumstance and provides the corresponding analyses of demonstrations.This dissertation provides a new method for pricing real option under vague circumstance. Furthermore, it is beneficial for the evaluation of risk-investment and useful for avoiding the mistaken investment decision-making.