The Research Of Real Option Pricing Model In Safety Investment

Safety investment has increasingly become an important factor to influence the level of safe production and the economic benefits. How to make the limited investment in the community to achieve the highest possible safety standards is the goal that people are working hard to seek. So it has been the key of safety work that how to evaluate the safety investment scientifically and effectively.This paper studies the real options pricing model of safety investment mainly. Irreversibility and uncertainly are the major features of safety investment projects, there are so many clear deficiencies in the traditional safety investment evaluation method, and often underestimate the value of safety investment projects, but real options approach can make up for these deficiencies. Firstly, it introduces the relevant knowledge about safety investment theory, and analyzes the possible impact factors of safety investment, policy makers must take full account of various factors, repeatedly balance the background, conditions and the pros and cons, it will be possible to get the most safety investment efficiency; Secondly, it introduces the relevant knowledge about the real options theory and analyzes the necessity to apply the real options method in the safety investment. By the detailed analysis of safety investment projects, we find that safety investment projects have many real options'characteristics, such as hidden characteristics, random characteristics, and so on. In the process of safety investment projects, there may exist option to delay, option to expand or option to contract, option to switch and others. Thirdly the real option approach is applied in the area of safety investment for real options pricing, the model assumptions are proposed, the real options pricing model of safety investment is established on the basis of the binomial model formula, and the parameters in the model are given new meaning to comply with the safety investment properties, and the two cases are analyzed by the model. Finally, it gives the conclusions and prospects.Real options approach has more advantages than the traditional method, and breaks through the inherent limitations of traditional method, and excavates the value of the uncertainty which is contained in the safety investment projects by its amendment to the traditional method. Hope that through this study, people's way of thinking can be changed. It provides a new idea for safety investment decision-making by the real options method applied to the area of safety investment.