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http://dx.doi.org/10.6106/KJCEM.2010.11.6.54

Time to Invest in Real Asset with Option Pricing Theory - Focused on REITs -  

Jun, Jae-Bum (프라임금융자산연구소, 도시및지역계획학)
Lee, Sam-Su (LH 토지주택연구원)
Publication Information
Korean Journal of Construction Engineering and Management / v.11, no.6, 2010 , pp. 54-64 More about this Journal
Abstract
A firm decides to go to the project based on its investment analysis. However, the cash flows generated from the real project can not be always coincident with what expected as it follows uncertain behavior and the asymmetric payoff caused by the managerial flexibilities involved in the real asset affects the project value. Amongst various managerial flexibilities entailed in most of the real assets, although investment delay has been known to enhance the project value thanks to its ability to provide new market information to management, the related research to select the time to invest have been just few. Therefore, this research aims to show the theoretical framework to decide when to invest reflecting the behaviors of increasing project value and loss recovery cost due to investment delay with option pricing, related financial economic, and variational theories.
Keywords
Option Pricing Theory; Investment Delay; Time to Invest; REITs; Variational Principle;
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