An Application Study of Valuation of Compound Options in The Real Project

Because for large-scale real estate project, the investment is big, the development cycle is long, and it is easy to be affected by the policy. Its decision-making has a bigger uncertainty. Compared with other investment projects, the real estate investment has the following characteristics: poor mobility; poor replacement; big impact of law; many impact factors.Real estate investment analysis is important in the process of real estate projects, and its success or failure is directly related to the consequences of the investment. But the traditional NPV approach ignores the uncertainties of real estate investment and values for dynamic flexibility. This article uses the Geske compound call option pricing formula to establish a real estate investment analysis and evaluation model which is based on the real options analysis in the investment of real estates and the compound option theory. The model makes up the insufficiency of traditional appraisal method. In addition, this article has considered delay costs and reduced the gap between the estimated value and the true one. In the model application, the article has provided a new perceptive and a new method for the value assessment in the real estate projects of multi-stage investments.