Study On Application Of Real-Option In Multi-Stage Venture Capital Decision

Venture capital is a high-risk investment, there is a high degree of information asymmetry in the course of operation, whether venture investor can make dynamic assessment of the risk of investment projects, and make appropriate investment decisions based on limited information or not, will directly related to the success or failure of the operation. However, study outcome on the field is still barren.Real option approach can fully tap the value of management flexibility and strategic flexibility inherent in the decision-making process. The main line of this paper is application of real options in investment decision-making standing on the point of view of investor: First of all, venture capital for the content, features and explain the decision-making methods, defining the focus of this article; then reviewing on the literature about investment decision-making and evaluation carried out to clarify the applicability of real options theory in investment and pointing out that current research is still in its infancy. Secondly, summing-up the general line of building option evaluation approach by overview real options model including Black-Scholes model and Binary tree model. Thirdly, make decision in use of real options approach from two opposite respect of venture capital investment: exclusive project and competitive project:1. Designing a set of decision-making trigeminal tree model based on the characteristics of investment, making a simulation of conventional stage status in venture capital investment decision-making in view of existence of three types of investment decision-making status: expansion, reduce and delay. 2. Based on the characteristics of joint investment, introducing game theory into study on the dynamic game questions in the immediate investor and delaying investor.This paper will help improvement of risk assessment tools and evaluation methods in decision-making, in order to help the investor to assess the value in investment projects accurately, so as to improve the efficiency of decision-making.