Study On The Evaluation Model Of Coal Resources Development Project Based On Real Option

Coal is an exhaustible and non-renewable resource. As the speedy development of national economy, demand for coal increases rapidly. Therefore, it must improve the coal growth by making or reconstructing a coal resources development project. The traditional evaluation method, based mainly on DCF, usually undervalues the value of coal resources development project, because it always neglects the flexibilities and the uncertainties of coal price, interest rate and production cost, etc. As a result, it cries out for building an evaluation method of coal resources investment project to reflect the uncertainties and flexibilities. So this paper studies on the evaluation method of coal resources investment project based on real option. The results of this research are as follows:(1) Reveals the formation mechanism of coal resources investment project based on real option. This paper analyzes the options properties of coal resources investment project, and proves that the process of coal resources development is actually composed of option to shut down and restart, option to defer, option to expand, etc. Meanwhile, it proves that to evaluate the value of coal resources investment project is to evaluate the value of the compound option composed of the options mentioned above. What's more, the paper analyzes the main factors affecting option value are coal price, interest rate, convenience yield, development cost and so on. Then it puts over that the value of coal resources investment project is equal to the sum of NPV and Option Premium.(2) Sets up evaluation model of coal resources development project when coal price,interest rate and convenient yield respectively follow stochastic movement. Analyzes the influence on coal resources investment project by those factors, and analyzes the stochastic movement model of them. On this basis, sets up the evaluation model of coal resources investment project when coal price follows GBM, interest rate is the process of HJM and convenience yield follows mean-reverting process.Uses the model built before by an example. The results show that the value is far more than NPV and it is approximately consistent with practical value, because the evaluation method of coal resources investment project based on real option could full deal with the uncertain informations and operating flexibilities...