OPTION PRICING OF RESIDENTIAL DEVELOPMENT IN SINGAPORE
PHANG YI LIANG
PHANG YI LIANG
Citations
Altmetric:
Alternative Title
Abstract
The option to delay a real estate development is valuable. This is because as time
passes, developers can gain additional information about evolving market conditions
and consequently, the value of the direct real estate asset under potential development.
This paper aims to use a real option valuation model to value the delay option
embedded in a vacant land (the direct real estate asset). The study successfully
explores the deployment of an open-end solution, that is commonly used to value
financial options, to intuitively value real options of vacant land under potential
development opportunities. The open-end trinomial solution can be appropriately used
to formulate the real call option valuation model as well as the real put option
valuation model. To test how good these models are, they are compared with the
alternative Samuelson-McKean model of valuing the option-to-develop for vacant
land.
Keywords
Source Title
Publisher
Series/Report No.
Collections
Rights
Date
2003
DOI
Type
Thesis