Compound Option Pricing Model Applied in Overseas Mineral Investment

Hua Luo; Wen Jing Yue

doi:10.4028/www.scientific.net/AMR.734-737.3332

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HomeAdvanced Materials ResearchAdvanced Materials Research Vols. 734-737Compound Option Pricing Model Applied in Overseas...

Compound Option Pricing Model Applied in Overseas Mineral Investment

Abstract:

According to characteristics of selecting an overseas mineral project，such as a long period, high-risk and investment decisions in different phased, several stages is divided in the process of entire mineral investment decision-making. Using the method of the multi-stage real option pricing method, the compound option pricing model is to construct the investment in mineral based on the compound call option pricing formula of Geske model. Taking a company for example, we introduce the probability of success in different stages for sensitivity analysis. Selecting the lower successful probability at the exploration stage and higher at the mining stage to illustrate the availability and stability of the model, helping investors to make the right choice.

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Periodical:

Advanced Materials Research (Volumes 734-737)

Pages:

3332-3336

DOI:

https://doi.org/10.4028/www.scientific.net/AMR.734-737.3332

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Online since:

August 2013

Authors:

Hua Luo, Wen Jing Yue

Keywords:

Compound Options, Geske Model, Overseas Mineral Investment Decisions, Valuation

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