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International Conference on Engineering and Business Management (EBM 2010 PAPERBACK)

Chengdu,China,China,3.24-3.26,2010

ISBN: 978-1-935068-05-1 Scientific Research Publishing, USA

Paperback 6066pp Pub. Date: March 2010

Category: Engineering

Price: $280

Title: A Pricing Approach to Real Option Based on Normal Cloud Model
Source: International Conference on Engineering and Business Management (EBM 2010 PAPERBACK) (pp 4205-4208)
Author(s): Shao-Wei YU, Business Shool, Shan Dong Ying Cai University, jinan , China,250104
Abstract: Abstract: In real option pricing, it is impractical to assume the present value of expected cash flow payoff as an exact number because it is a forecast one. Generally, the number is regarded as a triangular, trapezoidal or normal fuzzy number to give its estimated interval values and the Black-Scholes (abbreviated as B-S) formula is used to price the real option. A new pricing approach to real option is thus proposed to transform the forecast intervals evaluated by experts into two normal clouds with the synthetical cloud introduced to make concept promoting and to estimate the volatility of expected cash flow payoff based on backward normal cloud. A numerical example is given to illustrate the validity of the approach proposed.
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