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http://dx.doi.org/10.6106/KJCEM.2015.16.5.114

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

Jang, Mikyoung (Department of Architectural Engineering, Hanyang University)
Ku, Yohwan (Department of Architectural Engineering, Hanyang University)
Choi, Hyemi (Department of Architectural Engineering, Hanyang University)
Kwon, Tae-Hwan (Department of Architectural Engineering, Hanyang University)
Kim, Juhyung (Department of Architectural Engineering, Hanyang University)
Kim, Jaejun (Department of Architectural Engineering, Hanyang University)
Publication Information
Korean Journal of Construction Engineering and Management / v.16, no.5, 2015 , pp. 114-122 More about this Journal
Abstract
Real estate development requires significant amount of capital investment. The project duration has been increased according to its enlarged size. For this reason, cost overrun and time delay are important risk factors that should be managed properly. As a method to hedge the risk, varoius real option methods have been presented. However, conventional project value assesment methods such as NPV(Net Present Value) have weakness to support decision making by reflecting dynamic situations in terms of variation of cost and time. Furthermore, the decision making process is serious of actions rather than discrete event. The purpose of this paper is to present a multiple real option valuation method to overcome the deterministic aspect of real option presented in previous research and practice. The method is developed as following: firstly, to select the model that can be applied in the real estate development project through a survey from previous literature on real options analysis; secondly, to apply data from office development case in order to verify the model by applying conventional real option and multiple real option valuation. According to analysis result, multiple real option provides enhanced values comparing to NPV and single real option.
Keywords
Multiple Real Option; Binomial Lattice Model; Investment Valuation; Real Estate Development;
Citations & Related Records
Times Cited By KSCI : 4  (Citation Analysis)
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