scholarly journals VALUATION OF FLEXIBLE LEASES FOR CORPORATE TENANTS FACING UNCERTAINTY IN THEIR REQUIRED WORK SPACE

2010 ◽  
Vol 14 (1) ◽  
pp. 49-72 ◽  
Author(s):  
Baabak Ashuri
Keyword(s):  
Real Option ◽  
Maximum Amount ◽  
Option Valuation ◽  
The Real ◽  
Rental Market ◽  
Work Space ◽  
Real Option Valuation ◽  
Integrated Valuation

A valuation approach is presented to price flexible leases with expansion, contraction, and/or cancelation options from the corporate tenant perspective. This model uses the real option valuation approach and determines the flexibility value or the option premium of a lease. This premium is the maximum amount of money that the tenant is willing to invest in incorporating a specific flexible feature in the leasing arrangement. Our model considers uncertainty in the rental market, as well as uncertainty about the firm's required workspace in an integrated valuation framework. Santruka Pristatomas vertinimo metodas, kaip iš komercinio nuomininko perspektyvos ikainoti lanksčiaja nuoma su galimybe didinti arba mažinti plota ir (arba) atsisakyti nuomos. Šiame modelyje, taikant realiu pasirinkimo sandoriu vertinimo metoda, nustatoma nuomos lankstumo verte arba priemoka už galimybe rinktis. Ši priemoka ‐ tai maksimali pinigu suma, kuria nuomininkas pasiruošes investuoti, idant i nuomos susitarima galetu itraukti konkretu punkta del lankstumo. Mūsu modelyje i nuomos rinkos netikruma ir i netikruma del imonei reikiamo darbo ploto atsižvelgiama taikant kompleksine vertinimo sistema.

scholarly journals Comparison of the Datar-Mathews Method and the Fuzzy Pay-Off Method through Numerical Results

2016 ◽  
Vol 2016 ◽  
pp. 1-7 ◽  
Author(s):  
Mariia Kozlova ◽  
Mikael Collan ◽  
Pasi Luukka
Keyword(s):  
Monte Carlo Simulation ◽  
Monte Carlo ◽  
Simulation Model ◽  
Real Option ◽  
Fuzzy Numbers ◽  
Numerical Results ◽  
Option Valuation ◽  
The Real ◽  
Valuation Methods ◽  
Real Option Valuation

The paper compares numerically the results from two real option valuation methods, the Datar-Mathews method and the fuzzy pay-off method. Datar-Mathews method is based on using Monte Carlo simulation within a probabilistic valuation framework, while the fuzzy pay-off method relies on modeling the real option valuation by using fuzzy numbers in a possibilistic space. The results show that real option valuation results from the two methods seem to be consistent with each other. The fuzzy pay-off method is more robust and is also usable when not enough information is available for a construction of a simulation model.

scholarly journals Manager’s Flexibility & Cancellation Option: Insights of a Case Study in the Latin American Oil Industry

2017 ◽  
Vol 1 (3) ◽  
Author(s):  
Arthur Ridolfo Neto ◽  
Marcelo Moreira Russo
Keyword(s):  
Real Options ◽  
Latin American ◽  
Real Option ◽  
Net Present Value ◽  
Option Valuation ◽  
Investment Opportunity ◽  
Gas Field ◽  
The Real ◽  
Real Option Valuation

Purpose: This article focused on the main business insights of the use of Real Options valuation analysis in the eyes of a finance professional. It used a case study of an investment opportunity in the oil and gas field services industry in Latin America to discuss the methodology implementation and its insights. As a secondary objective, it discussed the insights and options embedded in this investment opportunity.Methodology: The investment opportunity was examined using the Real Options Analysis (ROA) framework and the results compared to the traditional methodology of Net Present Value. The valuation technique was performed as if it had been applied at the time the project was approved.Findings: The most important of Real Option valuation is not the results, but how one arrives at them. After the project value is calculated and the project approved or not, the Real Option valuation requires and supports the monitoring of the project. By understanding how the options are created, managers can make better decisions about the project after it was approved.Practical implications: A relevant contribution from the study was the discussion, as a practitioner, of the methodology implementation in a real world corporation. Originality & value: The case study evaluated two types of real options: first, the effect of an option to cancel a contract that was assessed from the perspective of the client contracting the project; and second, the option to abandon and defer, from the perspective of the company that will perform the investment to provide the services. By incorporating the cost of the put option that the company puts forth for the client (cancellation option) it reduces the project value by giving flexibility to its clients.

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