Option Pricing Models In The Valuation Of The Venture Capital Firm

Over the recent years, China's venture capital developed very quickly. Venture capital investment firms are also increasing in number. However, there are few adequate assessment system and methods in the evaluation field. The traditional methods are not adequate to reflect the real value of invested enterprises, and it often leads to the wrong investment decision. The evaluation of venture investment enterprises is so momentous that it influences whether the venture capital keeps being invested or not. Most of the venture capital firms are high-tech enterprises which are typically highly risky, and accompanied with high returns. It is very difficult to assess with the traditional method for those kinds of corporations because there are pretty high uncertainties during the venture capital process. Furthermore, traditional approach usually ignores potential value opportunities of venture investment enterprises, whereas the real option approach is much better in objectively reflecting the value of enterprise than the traditional way. For example, although the net present value of some venture investment enterprises is negative in the Start-up Stage, the enterprises need continuously invest to seek for the developing opportunity in the future. These kinds of investment can be quantified and analyzed in the methodology of the real option so as to avoid the loss of investment opportunities.This paper mainly studies the characteristics and classification of real options of venture capital enterprises in the very beginning, meanwhile it introduces the disadvantages of traditional methods applied in assessment the value of venture investment enterprise. Then it generally illustrates the problems where the traditional enterprise value methods are employed into assessment of the value of venture investment enterprise. After that it puts forward an ideology and method which evaluates in different phases. Let's say it in another words, the new ideology and method evaluates the enterprises at the different phases accordingly in the way of integration of theoretical analysis and practical application. It conceives a pricing model of the intangible assets for the venture enterprise in the initial phase, and...