Based on the jump-diffusion process of the coal resources development investment project evaluation model

Abstract

Coal resources development projects have many characteristics of large investment, irreversibility, long cycle and uncertainty and so on, due to the inherent defects of the traditional NPV method, which can't effectively deal with the uncertainty faced by the coal resources development investment, thus, the real value of the coal development investment projects are hardly assessed scientifically and rationally. Using the real options method, the paper builds a evaluation model on coal resources development investment project. The results show that using the model to assess the project value of coal resources development investment will be more scientific and rational, parameter analysis leads to the result that interest rates and convenience yields have a negative effect on the critical investment value of the projects, and the high jump frequency will reduce the critical investment value of the projects, while positive changes on jump range can increase. © 2013 Springer-Verlag Berlin Heidelberg.