Def inition of optimal proportion of phased investment : Real options approach
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    Abstract:

    This paper focuses on the two- stage investment problems of venture firms with successful R&D. Firstly , the two real options are identified with the help of real options thinking. After that , based on the analysis of profit function , stochastic models are proposed to describe the uncertainties inherent in markets. Then the value function of decision-making flexibility is derived as well as the vital executable probability of the two real options. Finally , numerical techniques are employed to calculate the optimal proportions of a case and the influence of investment pro2 portions upon the flexibility value is also analyzed.

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