The Study Of The Application Of Improved Real Option In Real Estate Investment Decision-making

The real estate industry economy has become the mainstay industry of national economy, and an engine of economic growth in china after 30 years of development.With the development of economy, the fierce market competition and changes in national macro polices, real estate developers faces numerous uncertainty factors in investment, but the traditional DCF-NPV model is the inability to make scientific evaluation on the value of the investment project, so many scholars or decision makers introduce the real option theory to investment decision-making, so as to make a more scientific and reasonable evaluation. But as a decision-making tool, the method is to quantify the value of investment project. Generally, users direct evaluate value of project using B-S pricing model, and did not consider whether to apply the model.In this paper, based on physical assets movement model, I put forward the assets price obeying mean reversion process, and build the real option pricing model. The price model uses the method of Monte Carlo simulation to find the approximate solution of option value, and applies to the real estate decision. At the end of the paper, the improved model is applied to real estate investment case, and is proved effective. Project value which is close to its real value is evaluated using the improved model. The improved pricing model evaluates project value which is close to its real value, makes the decision makers to make the right and scientific decisions. So the improved pricing model has practical value.