Shipping Vessel Investment Decision-making Method Based On Real Options Research

With the rapid development of the global economy, International shipping industry becomes more and more important for most of countries’economy and international trade. The international shipping market is an intensive capitals market and always full of vast risks. The international shipping investment is very important to international shipping enterprises. The decision-making of ship investment has a direct impact on the international shipping companies in the condition of the competitive international shipping market. So the correct decision-making of ship investment shipping is related to shipping companies’profits, developing even exist.With the development of the technology of the decision-making, the decision-making of ship investment has been with new challenge. The traditionally used Discounted Cash Flow(DCF) method like Net Present Value method is localized by its own limitations. It is difficulty for the shipping investors to catch hold of the managerial flexibility within the investment progress. During the shipping investment, the cash flowing is often out of the investors’anticipation in the numerous uncertain factors shipping market. In addition, ship investment has its own special characterizes other than other kind of investment, such as massive investment; long period for investment; many managerial flexibilities and so on. All these make it difficult to solve the problem of ship investment with traditional investment decision method.As concerned as that, I’d like to find a more suited and effective method to make ship investment decision, so I try to apply the Real Options method to the ship investment decision making. The Real Options method utilizes the ideas of financial options, treats the investment project as option, and to correctly price the managerial flexibilities that are hard to price with traditional method and is critical to the investment project. The utilization of the Real Options method can consider all kinds of characteristics of ship investment comprehensively, and objectively appraise the value of project. It can help shipping companies’decision-makers to avoid being in two minds and underestimating the projects’ strategic value.