Application of Option Pricing Theory to Decision-making on Mining Projects

ZHANG Nengfu; CAI Sijing; LIU Chaoma

doi:10.13374/j.issn1001-053x.2002.01.030

Volume 24 Issue 1

Aug. 2021

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ZHANG Nengfu, CAI Sijing, LIU Chaoma. Application of Option Pricing Theory to Decision-making on Mining Projects[J]. Chinese Journal of Engineering, 2002, 24(1): 5-7. doi: 10.13374/j.issn1001-053x.2002.01.030

Citation:

ZHANG Nengfu, CAI Sijing, LIU Chaoma. Application of Option Pricing Theory to Decision-making on Mining Projects[J]. Chinese Journal of Engineering, 2002, 24(1): 5-7. doi: 10.13374/j.issn1001-053x.2002.01.030

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Application of Option Pricing Theory to Decision-making on Mining Projects

doi: 10.13374/j.issn1001-053x.2002.01.030

1. Huainan Institute of Technology. Anhui 232001, China;
2. Civil and Environmental Engineering School, UST Beijing, Beijing 100083, China;
3. Southern institute of Metallurgy Ganzhou 341000, China

Received Date: 2001-04-23
Available Online: 2021-08-21

Abstract

Abstract

Investment in mining projects is influenced with many uncertainties such as coast, revenue etc. Traditional mining projects evaluation method, NPV, cannot be involved these uncertainties. Based on Option Pricing Theory(OPT), prices of mining outputs are modeled and incorporated into the analysis. Under consideration of uncertainties of mining costs and revenue, an option pricing model, a helpful approach and quantitative tools to the mining project evaluation, is developed.
- mining projects,
- decision-making,
- option pricing,
- uncertainty