Eres : Digital Library : Works

Paper eres2001_236:
Physical Real Estate : Risk Factors and Investor Behaviour

id eres2001_236
authors Mokrane, Mahdi; Baroni, Michael
year 2001
title Physical Real Estate : Risk Factors and Investor Behaviour
source 8th European Real Estate Society Conference (26-29 June 2001) Alicante, Spain
summary This paper considers the use of options in real estate risk financing and investment. A model similar to Black and Cox (1976) for pricing senior-junior debt claims is presented and proved useful for pricing outside debt financing in the context of real estate risk. Next, Quigg's (1993) strategic real options model is also simulated and used to value project flexibilities which cannot be captured using traditional net present value (NPV) models, such as delaying investment. These models' useful inputs, and especially the volatility estimator, are provided by results on real estate indexes derived in a companion paper by Barthélémy, Baroni and Mokrane (2001) on the risk factors in physical real estate, who use a database of over 100 000 transactions mainly for residential assets in the Paris area over the 1973 - 1998 period. Comparative statics and empirical implications are provided.
series ERES:conference
content file.pdf (263,294 bytes)
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