The Calculation of Volatility in Real Option Investment Decision-Making Model Using System Dynamics Models

Real options method has been increasingly used in value assessment and decision-making of investment projects. However, the determination of volatility factor in the pricing model is still an open issue. In this paper, system dynamics approach is presented, to set a model on influencing factors and decision-making process of uncertain investment projects. Acquire different volatility data of project value under varieties of situation influencing by various factors, then carry out the calculation of option value and project decision-making.