Real Option Model of Real Estate Development with Entitlement Risk

2012 ◽  
Author(s):  
Yiying Cheng ◽  
Steven P. Clark
Keyword(s):  
Real Estate ◽  
Real Option ◽  
Real Estate Development ◽  
Option Model

scholarly journals A Study on the Multiple Real Option Model for Evaluating Values based on Real Estate Development Scenario

2015 ◽  
Vol 16 (5) ◽  
pp. 114-122
Author(s):  
Mikyoung Jang ◽  
Yohwan Ku ◽  
Hyemi Choi ◽  
Tae-Hwan Kwon ◽  
Juhyung Kim ◽  
...  
Keyword(s):  
Real Estate ◽  
Real Option ◽  
Real Estate Development ◽  
Option Model

A Real Option Model Suitable for Real Estate Project Investment Decision

2011 ◽  
Vol 225-226 ◽  
pp. 234-238
Author(s):  
Xiao Ling Ke ◽  
Feng Qin Diao ◽  
Ke Jun Zhu
Keyword(s):  
Real Estate ◽  
Real Option ◽  
Investment Decision ◽  
House Price ◽  
High Sensitivity ◽  
Project Investment ◽  
Real Estate Investment ◽  
Real Estate Project ◽  
Option Model ◽  
Flexible Management

Real estate investment is distinctively different from others with its high input capital, long period of recycling, huge fluctuation of house price and high sensitivity to other factors. The traditional decision method could not make a rational judgment of the flexible management value in real estate project investment. With regards to the policy and market features of real estate investment in China, a real option model suitable for real estate project investment decision under high uncertainty in China is constructed. At last, a case of a real estate company is studied to test the real estate investment decision model.

scholarly journals Optimization of Tourism Real Estate Development Project Based on Option Premium Model

2021 ◽  
Vol 2021 ◽  
pp. 1-8
Author(s):  
Donglei Ying
Keyword(s):  
Decision Making ◽  
Real Estate ◽  
Real Option ◽  
Investment Decision ◽  
Case Analysis ◽  
Distribution Model ◽  
The Real ◽  
Investment Decision Making ◽  
Real Estate Project ◽  
Option Model

Compared with that of traditional housing real estate, the development of tourism real estate is time-consuming, complex, and irreversible. It is hard to guide investment decision-making on tourism real estate with the conventional discount cash flow (DCF) method. This paper aims to demonstrate that the real option method can improve and optimize the investment decision-making on tourism real estate. Through case analysis, the real option model, i.e., the classic American real option model, and binary tree value distribution model were adopted to analyze the factors affecting the real option of tourism real estate, optimize the development sequence of tourism real estate project, and demonstrate the phased development value of tourism real state, thereby enhancing the development value of tourism real estate projects. The case analysis proves that tourism real estate investment is fully consistent with real option in the uncertain spatiotemporal attributes: uncertainty, irreversibility, and timeliness. Therefore, tourism real estate project carries obvious features of real option. The decision-making by the real option model is much more scientific and superior than that by the conventional DCF method. Since the application of real option theory has been emphasizing housing real estate over tourism real estate, the research results enrich the theory on real option-based investment decision-making for real estate and expand the application scope of real option.

Developers’ heterogeneity and real estate development timing options

2017 ◽  
Vol 35 (5) ◽  
pp. 472-488 ◽  
Author(s):  
Zhi Dong ◽  
Tien Foo Sing
Keyword(s):  
Real Estate ◽  
Real Option ◽  
Interactive Effects ◽  
Real Estate Development ◽  
Variable Model ◽  
Content Type ◽  
Land Banking ◽  
Marginal Costs ◽  
Positive Externalities ◽  
Positive Externality

Purpose The purpose of this paper is to examine developers’ optimal development timing when developers are heterogeneous and have different marginal costs in a real estate development market. Design/methodology/approach This study uses a multiple-player game theoretic real option model and provides tractable results of asymmetric development strategies from a two-stochastic-variable model. Anecdotal evidence and market observations are presented. Findings Stronger developers (with low marginal costs) exercise real estate development options earlier than weaker developers (with high marginal costs). However, the interval time between developments by stronger and weaker developers decreases in rental volatilities. Real estate with a high positive externality are developed earlier than real estate with a low or negative externality. Practical implications Weaker and smaller developers are advised to undertake projects having positive externalities from vicinities. Government agencies are recommended to use tools of zoning and urban planning to prioritise developments introducing positive externalities and to facilitate the growth of weaker and smaller developers. This may subsequently help reduce incentive for land banking and oversupply in real estate space market. Originality/value This research is probably the first to explicitly incorporate developers’ heterogeneous strength in real estate development timing options with multiple developers in a competitive market. It sheds additional insights into the understanding of potential problems of development cascades, under the interactive effects between exogenous policy changes and endogenous response from asymmetric developers.

Real Option Analysis: A Switching Application for Mixed-Use Real Estate Development

2012 ◽  
Vol 18 (3) ◽  
pp. 277-291 ◽  
Author(s):  
Ron Throupe ◽  
Sewalk Stephen ◽  
Juncheng Zhong ◽  
Huo Chen
Keyword(s):  
Real Estate ◽  
Real Option ◽  
Real Estate Development ◽  
Real Option Analysis ◽  
Mixed Use
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