scholarly journals REAL OPTION AND VERTICAL MIXED-USE DEVELOPMENT

2021 ◽  
Vol 25 (5) ◽  
pp. 382-395
Author(s):  
Jiawei Zhong ◽  
Eddie C. M. Hui
Keyword(s):  
Real Option ◽  
Market Price ◽  
Pricing Model ◽  
Critical Height ◽  
Advantages And Disadvantages ◽  
Land Use Efficiency ◽  
Mixed Use ◽  
Real Option Approach ◽  
Option Pricing Model ◽  
Lease Contracts

Vertical mixed-use development is a favourite choice in urban development in high-density Asian cities to increase the land use efficiency. The flexibility of construction timing and the restrictions by lease contracts in vertical mixeduse projects are usually different from horizontal ones and single-use properties. To improve the valuation for vertical mixed-use projects, this study re-examines the real option pricing model. Simultaneous development for different uses and a finite maximum waiting period are the major characteristics of these projects. An approach is introduced to determine whether to develop a mixed-use project vertically or horizontally on the basis of a statistics called the critical height premium. The vertical mixed-use project pricing model can be further verified by containing a height premium if market price information is derived from non-vertical mixed-use properties. This study suggests a more comprehensive real option approach to quantify the advantages and disadvantages of operating vertical mixed-use developments.

scholarly journals The Sunk Cost and the Real Option Pricing Model

Complexity ◽  
2021 ◽  
Vol 2021 ◽  
pp. 1-12 ◽  
Author(s):  
Songsong Li ◽  
Yinglong Zhang ◽  
Xuefeng Wang
Keyword(s):  
Option Pricing ◽  
Real Options ◽  
Real Option ◽  
Value Function ◽  
Intrinsic Value ◽  
Pricing Model ◽  
Sunk Cost ◽  
Financial Options ◽  
Real Option Pricing ◽  
Option Pricing Model

Although the academic literature on real options has grown enormously over the past three decades, hitherto an accurate real option pricing model has not been developed for investment decision analyses. In this paper, we propose a real option pricing model based on sunk cost characteristics, which can estimate the value of real options more accurately. First, we explore the distinctive features that distinguish real options from financial options. The study shows that the distinguishing feature of the real options is the sunk cost, which does not exist in the financial options. Based on the sunk cost characteristic of real options, we find that the exercise conditions of real and financial options are different. Second, we introduce the sunk cost into the intrinsic value function of real options and establish a new real option pricing model. Finally, this paper also discusses the properties of the intrinsic value function and pricing model of real options. We find that the application of the Black–Scholes option pricing model will overestimate the value of real options.

A new method to solve fuzzy stochastic finance problem

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Jayanta Kumar Dash ◽  
Sumitra Panda ◽  
Golak Bihari Panda
Keyword(s):  
Option Pricing ◽  
Market Price ◽  
Pricing Model ◽  
Strike Price ◽  
Content Type ◽  
Fuzzy Environment ◽  
Black Scholes ◽  
Option Pricing Model ◽  
A New Technique ◽  
Log Normal

PurposeThe authors discuss the value of portfolio and Black–Scholes (B–S)-option pricing model in fuzzy environment.Design/methodology/approachThe B–S option pricing model (OPM) is an important role of an OPM in finance. Here, every decision is taken under uncertainty. Due to randomness or vagueness, these uncertainties may be random or fuzzy or both. As the drift µ, the degree of volatility s, interest rate r, strike price k and other parameters of the value of the portfolio V(t), market price S_0 (t) and call option C(t) are not known exactly, so they are treated as positive fuzzy number. Partial expectation of fuzzy log normal distribution is derived. Also the value of portfolio at any time t and the B–S OPM in fuzzy environment are derived. A numerical example of B–S OPM is illustrated.FindingsFirst, the authors are studying some various paper and some stochastic books.Originality/valueThis is a new technique.

Valuation of a Troubled Firm: A Case Study on Jet Airways

2014 ◽  
Vol 1 (2) ◽  
Author(s):  
Anjala Kalsie
Keyword(s):  
Real Option ◽  
Market Price ◽  
Discounted Cash Flow ◽  
Book Value ◽  
The Real ◽  
Real Option Approach ◽  
Indian Firm ◽  
Real Option Method ◽  
Discounted Cash Flow Method

The objective in the paper is to value a firm in distress which is struggling to survive and continue its operations, unable to meet its debt obligations, and making losses so that it has a negative book value. The paper has taken a listed Indian firm which is in operation since a decade called Jet Airways. The paper looks at different methods to value this company, the most prominent being the real option approach to valuation. Finally, a comparison of different valuation methods was done with the real company price. The Discounted Cash Flow method tends to overvalue the price of a distressed firm. Real option method gives us a much smaller intrinsic price which is even close to the market price of the share.

scholarly journals Fuzzy Optimization of Option Pricing Model and Its Application in Land Expropriation

2014 ◽  
Vol 2014 ◽  
pp. 1-7 ◽  
Author(s):  
Aimin Heng ◽  
Qian Chen ◽  
Yingshuang Tan
Keyword(s):  
Option Pricing ◽  
Real Option ◽  
Fuzzy Variable ◽  
Fuzzy Optimization ◽  
Pricing Model ◽  
Land Expropriation ◽  
Fuzzy Environment ◽  
Real Option Pricing ◽  
Option Pricing Model ◽  
Current Price

Option pricing is irreversible, fuzzy, and flexible. The fuzzy measure which is used for real option pricing is a useful supplement to the traditional real option pricing method. Based on the review of the concepts of the mean and variance of trapezoidal fuzzy number and the combination with the Carlsson-Fuller model, the trapezoidal fuzzy variable can be used to represent the current price of land expropriation and the sale price of land on the option day. Fuzzy Black-Scholes option pricing model can be constructed under fuzzy environment and problems also can be solved and discussed through numerical examples.

An R&D Project Dealing with Mechanical Bits and Pieces in Real Option Analysis

2012 ◽  
Vol 472-475 ◽  
pp. 583-586
Author(s):  
Hua Luo ◽  
Ming Zi Zhu
Keyword(s):  
Decision Tree ◽  
Option Pricing ◽  
Real Options ◽  
Real Option ◽  
Practical Case ◽  
Pricing Model ◽  
Market Uncertainty ◽  
Real Option Analysis ◽  
Real Options Valuation ◽  
Option Pricing Model

The goal of this paper is to study the R&D project under incomplete information. We extend the multi-step quadrinomial option pricing model through a practical case, which is the R&D project of the machinery to deal with mechanical bits and pieces. We pricing the real options valuation (ROV) of the project and show a decision tree, which can provide managers flexible decisions to analyze technology and market uncertainty.

Compound Option Pricing Model Applied in Overseas Mineral Investment

2013 ◽  
Vol 734-737 ◽  
pp. 3332-3336
Author(s):  
Hua Luo ◽  
Wen Jing Yue
Keyword(s):  
Option Pricing ◽  
Real Option ◽  
Investment Decision ◽  
Pricing Model ◽  
Multi Stage ◽  
Investment Decision Making ◽  
Successful Probability ◽  
Real Option Pricing ◽  
Option Pricing Model ◽  
The Right

According to characteristics of selecting an overseas mineral project，such as a long period, high-risk and investment decisions in different phased, several stages is divided in the process of entire mineral investment decision-making. Using the method of the multi-stage real option pricing method, the compound option pricing model is to construct the investment in mineral based on the compound call option pricing formula ofGeskemodel. Taking a company for example, we introduce the probability of success in different stages for sensitivity analysis. Selecting the lower successful probability at the exploration stage and higher at the mining stage to illustrate the availability and stability of the model, helping investors to make the right choice.

An Empirical Test of the Black-Scholes Option Pricing Model and the Implied Variance: A Confidence Interval Approach

1987 ◽  
Vol 2 (4) ◽  
pp. 355-369 ◽  
Author(s):  
Haim Levy ◽  
Young Hoon Byun
Keyword(s):  
Confidence Interval ◽  
Option Pricing ◽  
Implied Volatility ◽  
Empirical Test ◽  
Market Price ◽  
Pricing Model ◽  
Black Scholes ◽  
Option Pricing Model ◽  
S Model ◽  
Over Time

The empirical studies on the Black-Scholes (B-S) option pricing model have reported that the model tends to exhibit systematic biases with respect to the exercise price, time to expiration, and the stock's volatility. This paper attempts to test the B-S model with a new approach: derive the confidence interval of the model call option value based on the confidence interval of the. estimated variance. The test reports that even when the variance's confidence interval is considered, a systematic deviation between the theoretical “range” of the option price values and the observed market price still exist. If the stock variance is constant over time, the interpretation of the results is that the B-S model is wrong. However, if stock variance changes over time, the interpretation of the results is that the implied volatility in options market prices had a tendency to be significantly higher than the estimate that could have been obtained from historical data.

Calculation of B-S Model on Carbon Emission Right Transaction Price and Clean Development Mechanism Strategy of Jiangsu

2014 ◽  
Vol 962-965 ◽  
pp. 1616-1620
Author(s):  
Xiao Yue Lv ◽  
Ying Hui Jian ◽  
Chang Xin Xu
Keyword(s):  
Real Option ◽  
Market Price ◽  
Carbon Trading ◽  
Low Carbon ◽  
Pricing Model ◽  
Low Carbon Economy ◽  
Real Option Theory ◽  
Trading Market ◽  
Resource Endowment ◽  
Trade Market

It is a tendency to develop low-carbon economy and lifting the ability of carbon trade and clean development. Through potential analysis of CDM project progress, economy foundation and resource endowment to developing the carbon trade market of Jiangsu companies, we can find that this district possesses huge space for energy conservation and emissions reduction. Meanwhile, we have introduced real option theory to the carbon trading mechanism of empirical research. By using the B-S pricing model and European carbon option trade market data, constructed a carbon option pricing model, then based on the similarity economy comparison between European Union and Jiangsu province, obtain the discounted carbon trading market price of Jiangsu area. At last, around technology, management and policies levels to putting forward some relevant suggestions and measures on CDM mechanism provided beneficial basis and references to Jiangsu companies in stepwise development of carbon trading market under CDM mechanism.

Sign in / Sign up

Export Citation Format

Share Document