Eres : Digital Library : Works

Paper eres2007_223:
Real Option Pricing in Mixed-use Development Projects

id eres2007_223
authors Marcato, Gianluca; Robert Fourt & Charles Ward
year 2007
title Real Option Pricing in Mixed-use Development Projects
source 14th Annual European Real Estate Society Conference in London, UK
summary The application of real options theory to commercial real estate has developed rapidly during the last 15 Years. In particular, several pricing models have been applied to value real options embedded in development projects. In this study we use a case study of a mixed-use development scheme and identify the major implied and explicit real options available to the developer. Moreover, we offer the perspective of a real market application by providing a decision framework in order to price the main real options through a binomial approach with a combined set of measures to quantify development risk and resolve uncertainty, timing, irreversibility and pricing. We identify an approach to ascertaining appropriate volatility inputs for the model. Finally we suggest our framework can be used for risk assessment purposes, both ex-ante and ex-post.
series ERES:conference
discussion No discussions. Post discussion ...
session Session D3: Real Options
last changed 2009/11/19 09:01
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