Pricing Model Of Real Option Subjecting To Mean Regression

Traditional project valuation method NPV needs to be corrected by Real Option method. But the real option is not free, investors must consider their cost and option value, so it is very important to pricing real option.The pricing model of real option is created and developed based on the B-S pricing equation which are usually applied in financial option. Most researchers directly take an assumption that underlying assets price moving mode is Geometric Brownian Motion, don't ever deeply consider whether it is proper. This paper oppugns this assumption and puts forward that real assets are different from financial assets because of their different markets and intrinsic values. Their pricing moving motions are likely to be very different. We believe that real assets prices moving mode should obey Mean Reversion moving mode in long term, meanwhile cobweb model and general equilibrium analysis also confirm this standpoint.In other way, the demonstration of coal price index indicates that this viewpoint can be established. Based on Mean Reversion price moving mode, this paper corrects B-S pricing equation, gets an implicit real option pricing equation which can deduce explicit option pricing equation with detailed option price boundary. However, the deducing of option price needs lots of partial differential coefficient and probability knowledge, which makes the corrected B-S equation difficult to be used by investors, so we introduces an computer simulation method-Monte Karlo Simulation and apply it in an coal exploitation case.