Real Options in Investing in Real Estate Cover Image

Реални опции при инвестиране в недвижими имоти
Real Options in Investing in Real Estate

Author(s): Milcho Bliznakov
Subject(s): Economy, National Economy, Business Economy / Management
Published by: Икономически университет - Варна
Keywords: Investments; Monte-Carlo simulation; Portfolio reproduction; Real Options; Risk neutral probabilities.
Summary/Abstract: The paper compares different approaches to assessing real options (abandon options) when investing in residential property. The value of the investment is determined by capitalizing on rents at a constant rate of growth model Gordon.The risk-neutral probability approache, and the Datar-Mathews method are applied to real estate market data and compared. The results obtained when evaluating the abandon option are comparable. Availability of real options increases the value of the investment.