Abstract
In order to determine whether there is a bubble in the real estate market, financial option pricing theory is applied to physical investment in this paper. We assume that the real estate asset price obey the Poisson jump geometric Brownian motion, and use Jump-diffusion real option pricing model to determine the real estate value. The basic price of the real estate is estimated by exercise price of the option multiplied by the CPI. The real estate price bubble can be calculated by the actual price and basic price of real estate. Taking Beijing for example, we study the basic price, the actual price and the price deviation rate of the residential houses.From calculating the real estate market bubble and bubble degree, we conclude that there exists secondary bubble in Beijing real estate market from January to December in 2006. Since the beginning of 2007, the bubble appears durative. Until the fourth quarter of 2008 it slows down a little. From the beginning of 2009 it has always been in a bubble.
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