Abstract: This paper presents a real option pricing model based on information-theory. It depends on historical data and investor’s experience to estimate the option price of a project or production,as a result it avoids the problem caused by traditional option pricing models which heavily rely on the choice of parameters and many assumptions.Furthermore,in this paper,the author also discusses the relationship between this model and the traditional option pricing model,and reasonably explains the importance of information in the investment decision Finally,the applicaition value of this model is illustrated by using an example.

Key words: Information, real option, risk-neutral probabilities, cross-entropy