The Research Of Real Option Pricing Applied In Hengfeng Bank’s Equity Investment

On April 21,2016,the "Guidance Opinions on Supporting Banking Financial Institutions to Intensify Innovation in Launching Pilot Projects for Investment and Loan Linkage by Scientific and Technological Innovation-oriented Enterprises"issued jointly by the China Banking Regulatory Commission,the Ministry of Science and Technology,and the People’s Bank of China allowed the pilot banks to carry out equity investments in scientific and technological innovation-oriented enterprises at the right moment.This signifies that the qualified pilot banks can gradually make equity investment while providing loans to enterprises in the pilot area based on their own situation.As the only nationwide joint-stock commercial bank among the ten pilot banks,Evergrowing Bank features high management flexibility and certain anti-risk capability with a strong business innovation.However,due to the fundamental difference between equity investment and its traditional deposit and loan business,there are certain difficulties in the selection of personnel,management,and investment and loan linkage mode.This paper focuses on the study of corporate valuation in the process of equity investment.The new material industry is applied as the investment object of Evergrowing Bank.Through the analysis of new material industry characteristics and risks,it is found that the traditional valuation method cannot reflect the value of the enterprise accurately.The introduction of real option theory and pricing mode will help the identification of real options in new material industry and the pricing of the flexible decision-making power which will become part of the value of the enterprise.Taking GH company as an example,a real option pricing mode suitable for GH company is established,The research results show that due to the characteristics of the new material industry itself,it will inevitably lead to greater value of flexible management in its business process.Therefore,the assessment of such enterprise value should combine the traditional pricing model with the real option model.which provides a new method for the valuation of the enterprise.