Real Options Approach to the Value of Technology Products

Stochasic differential equations were applied to describe the value behavior of technology products according to their typical characteristics,such as,multiplestage,high ricky and uncertainty.Combined with the real option approach,a twostage compound real option pricing model is built up and an analytical solution acquired using a reverse chronological order approach.Numerical results showed that the model can overcome the defectiveness of market comparison approach,income present value approach and replacement cost approach.