doi:10.4236/ib.2011.31007 Published Online March 2011 (http://www.SciRP.org/journal/ib)
Real Options Literature Review*
Shihong Zeng, Shuai Zhang
Finance Department of Economics Management School, Beijing University of Technology, Beijing, China Email: firstname.lastname@example.org Received October 19th, 2010; revised November 19th, accepted 26th, 2010.
After 30 years of discussion and research, the academic community has established a complete theoretical system of real options and provided an excellent framework for the use of real options theory in the investment appraisal of high-tech projects. An option is an entitlement without any obligation and it has been used to describe a variety of management decisions in business investment. The description of management is effective and proper. Due to the introduction of real options theory, there has been a major breakthrough in the investment area. Project evaluation is the core content of bank credit risk assessment and business evaluation. The core content never changes from the investment evaluation framework to the credit risk evaluation framework. The project evaluation meets various needs of subject s in different ways. In this paper, the importance of real options is analyzed and the literature is reviewed. Keywords: Real Options, Literature Review, Enterprises
A knowledge economy speeds the development of science and technology enterprises. There were 55 National Level High-Tech Industrial Development Districtsestablished by 2008, with a total output value break zone GDP of 1.5 trillion Yuan RMB (REN MING BI) in these districts. In China, this accounted for 5%. This is greater than 11 percentage points over the same period of the GDP. These districts created 80% of the scientific and technological achievements of the country. Zhongguancun Science and Technology Park Zone in China, for example, are the most active areas of innovation and entrepreneurship in China. There have been more than 3,000 high-tech enterprises founded and 100 or more of them produce an annual 100 million in sales revenue. A large number of the scientific and technological achievements made by these enterprises have effectively promoted technological advances and market competition. They play an important role in product innovation, industrial restructuring, employment opportunities and the rise of the regional economy. Scientific and technological enterprises develop rapidly, but financing bottlenecks become the primary ob*The research was achievements of the current stage of 2011 Beijing philosophy & Social Science research program (2011 Beijing Education Committee key project): a subtopic of study on financial development in Beijing. The research was supported in part by The China Scholarship Council (CSC) (3036).
stacle restricting their development. On October 30, 2009, 28 companies were officially listed on the GEM. Relative to China’s vast scientific and technological enterprises, there is a long way to go to get their economic power to the open market and financing directly at this stage. Currently, bank loans are still the main channel of finance for technical enterprises. Large fluctuations will occur in short-run operating activities because of the great risk and uncertainty of the high-tech enterprises, so it is difficult to make a reasonable forecast of a company’s future by means of its information and project data items. These problems lead to the banks having great difficulties in making correct judgments when high-tech enterprises and high-tech projects need bank loans. It is an internal control issue in credit risk when a bank decides to accept high-risk technology companies and accept scientific and technological projects. The bank must set up a strong credit risk identification, supervision and management mechanism. Since the People's Bank provides a floating rate for a loan, banks can not offset high risk...