• International conference on construction engineering and project management
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• 2013.01a
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• pp.129-132
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• 2013

Determining on a particular construction method is typically decided in the initial phases of a project. However, changing conditions during actual construction may require a different method or technology to be employed. Providing an option for project managers to change construction provides flexibility that can increase value to the overall project. This research provides the ability to modify construction methods as a real option, which allows its value to be modeled. The research also formalizes a way to integrate a binomial lattice model with the Earned Value Method's S-curve. The integrated model provides a decision support tool that planners can use to determine whether to exercise the option depending on the status metrics provided by EVM.

• Journal of Korean Institute of Industrial Engineers
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• v.29 no.2
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• pp.126-134
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• 2003

Among a variety of models proposed by so far to calculate the real options value when the investment decision about the underlying project may be delayed, the Black-Scholes and the binomial lattice models have been widely used and discussed by academics and practitioners. However these two models do not provide us with intuition into how it is constructed and what it does really mean. In this paper, we will therefore explore its components and practically more intuitive meaning. With the components explored, we developed the mathematical model to calculate the real options value and thus strategic net present value, based on the opportunity cost concept, for which the investment decision about the underlying project is postponed by one year. We will finally present a short illustrative example for readers better understanding on the model proposed in the paper.

• The Korean Journal of Financial Studies
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• v.3 no.2
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• pp.329-364
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• 1996

Writing naked put options is a strategy employed either as a speculation to capture premium income, or as a method of placing a limit order to buy the underlying at the strike price in return for premium received. Using a Monte Carlo simulation, twenty thousand equity prices are generated under known volatility and return parameters. A binomial tree is constructed using the same volatility and return parameters. Put options on these 'equities' are valued with the binomial methodology. The performance of various put writing strategies is evaluated on a risk-adjusted basis. Evidence presented suggests that the judicious use of put options may enhance returns during portfolio construction.

• Proceedings of the Korean Operations and Management Science Society Conference
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• 2000.04a
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• pp.314-317
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• 2000

금융파생상품인 옵션의 가치평가를 이해하는 데 널리 사용되는 이항분포모형은 다음과 같은 특징을 가지는 것으로 알려져 있다 첫째, 옵션의 가치는 주가의 상승 또는 하락할 확률과는 무관하게 결정된다. 둘째, 옵션의 가치는 투자자의 위험에 대한 태도와는 관계없이 결정된다. 이 논문에서는 옵션의 기초물인 주가가 한기간 후에 상승 또는 하락하는 기본모형에서 옵션의 가치평가가 주가의 변동 확률과 투자자의 위험에 대한 태도와 무관하지 않음을 예제를 통하여 밝히게 될 것이다.

• Korean Journal of Construction Engineering and Management
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• v.12 no.3
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• pp.121-130
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• 2011

Real option values of early termination payment for selected BTO PPI projects are studied using binomial models. Two cases of early termination payments are considered; an option with the condition of private participants' default, and an option without the condition. Values vary depending upon parameter values such as revenues, costs, discount rates, debt ratio, and volatility of revenues. For selected projects, the option values without the default condition are estimated as 1%~7% of total project costs, whereas the option values with the default condition are estimated as 0%~1.89% of total project cost. When actual revenues differ from the forecasted revenues, apparently the option values deviate from the values based upon the forecasted revenues. When actual revenues fall short of the forecasted revenues, the option values increase by a large amount whereas the option values decrease by a small amount in the opposite case. This implies that the option values can be quite bigger than the values based upon the forecasted revenue especially when the revenue forecast uncertainty is large. This study is expected to play an important role in improving the early termination payment option policy of the government in PPI projects in Korea.

• Korean Journal of Construction Engineering and Management
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• v.16 no.5
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• pp.114-122
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• 2015

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.

• Journal of the Korea Academia-Industrial cooperation Society
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• v.14 no.11
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• pp.5465-5475
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• 2013

In this study, when to invest in real estate abroad, to present a real option in the way of decision-making. Thus, by using the binomial option model of one of the real thing and DCF, we compared the choice of real estate investment in China and South Korea. Research concerns the real estate market of Shanghai and Seoul, Analyzed the data between 2001-2009. Results were calculated NPV investment period (Net Present Value), Seoul appears in 435.44, Shanghai was 398.26. Investment decision by NPV method will select Seoul. However, as a result of calculating the value using the real option, it was found that for Seoul appear in 615.4, Shanghai has been shown to 626.1, and is suitable for investment in Shanghai. Assuming on the basis of this, that it has invested in practice, and compare the results, Seoul is intended for since 2010, real estate prices fell to 2013 currently, damage has occurred, profit's occurred Shanghai. This ensures that when making decisions in real estate investment and to use the real option than the existing DCF is appropriate.

• Korean Journal of Construction Engineering and Management
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• v.18 no.3
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• pp.74-83
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• 2017

The recently introduced public rental housing REITs was just different the business structure from the existing public rental housing system and the basic supply system is the same. So the ownership conversion for public house over 10 years rental duration is possible after half of the obligated rental duration according to the agreement between lessor and lessee. However rental business operators are likely to have a negative attitude to the early ownership conversion because of less expected profit. Thus, there is a need for an analysis of proper early ownership conversion moment that can achieve public purposes while ensuring the profitability of public rental housing REITs. In this study, the characteristics of the ownership conversion rights that can lessee to exercise considered to be options. Also the nature of 'REITs', 'public rental housing REITs' is considered to be affected by the macroeconomic variables. Thus, this study analyzed the value for ownership conversion in the public rental housing REITs according to real option scenarios reflecting macroeconomic variables. As a result, according to the change of the variation rate of the macroeconomic variables, it was found that with adjustable early ownership conversion time using the DCF(Discounted Cash Flow) model. Therefore, it is possible to ensure profitability of early ownership conversion by predicting the variation of variables.

• Journal of Korea Port Economic Association
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• v.28 no.3
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• pp.235-257
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• 2012

Recently the role of ports has been changed to satisfy flexibly needs of demands in global economy. A new concept for ports is not just a place for international trade but an important nodal point in logistics chain. The changing environment like this trend creates a high degree of uncertainty and leaves port managers confused with the question how to respond effectively to dynamic market. The latest studies provide that the port must have a good hinterland to achieve competitive advantages in a logistics chain. Korean Government announced "The Master Development Plan for Port Logistics Parks in Korea" in 2006. This contains the plan of hinterland construction of Busan New Port to achieve the status of logistics hub in Asian market. Previous studies rely solely on traditional DCF(discounted cash flow) analysis for investment of hinterland. However DCF method does not include irreversibility, uncertainty and the choice of timing for investment project. This thesis introduces a ROPM(real options pricing model) which overcomes the limitations of traditional valuation methods. The option valuations in this study utilize the Black-Scholes model, the binomial model and the MonteCarlo simulation to value investment opportunity of a port hinterland. In this thesis, an attempt is made to modify the NPV criterion by incorporating the real options approach, and its application is demonstrated in a hinterland construction investment plan. This research has conducted an empirical analysis by calculating economic value of the investment for a hinterland of Busan New Port.

• Korean Journal of Construction Engineering and Management
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• v.15 no.1
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• pp.39-50
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• 2014

After the global financial crisis, domestic construction industry has gone through a rapid recession. This resulted in gradual market shift towards architectural remodeling. Architectural remodeling not only improves residential environment but it has many advantages such as increase of each unit's exclusive area, free space within the horizontal or extension of an annex building, and increase number of household through splitting the household of bigger pyeong, etc. However, in case of the Korean market for apartment remodeling, due to various regulations and problem with business promotion procedures, majority of business is slow despite the figure that remodeling volume is not that small. Also, feasibility study which decides to push ahead public house remodeling business will have a flaw using net present value's law; it has a flaw of not considering properties of each phase of remodeling business and future's uncertainty. Hence, this research will improve the problem of traditional value assessment method of net present value's law. It will also consider one of the real options such as binomial model in order to supplement NPV which is used in current feasibility study. This research was based on real successful cases of public house remodeling and it was possible for feasibility study which was more realistic and valid. This research provided foundation for development of Korean public house remodeling market. There is high anticipation of increasing the validity by improving the problems of current feasibility study and economic efficiency assessment.