The Approach of Real Option Pricing Model under the Urban Renewal Investment

• Main Authors: Jun Yuan Huang, 黃俊源
• Other Authors: Guo Wei Sh
• Format: Others
• Language: zh-TW
• Published: 2001
• Online Access: http://ndltd.ncl.edu.tw/handle/74946198427678348136

碩士 === 朝陽科技大學 === 財務金融系碩士班 === 89 === The Statue of Urban Renewal has been promulgated and enforced since November 11,1998. By putting the statue into practice, those decaying areas could be restored; the government could levy lands for public works to elevate local living quality. Furthermore, those decaying areas could revive their advantage of location and raise the value of real estates. The Urban Renewal Investments are involved in more uncertain factors than traditional real estate investments are. Net Present Value Method (NPV) is traditionally the major assessing norm for financial projects, while there are some faults within it, such as only accepting investments when their NPV are over 0, neglecting the cash flow outside the calculating term, and ignoring the fact that managers could modify investing scale freely. Real Option means that the managers have optional rights in a real asset investment. It combines concepts of “elasticity” and “risk” to resolve the problems of uncertainty and management flexibility in urban renewal investments, which is the major difference between Real Option and traditional NPV. It is confirmed that lowering developers’ expenditures is the best means to stimulate the urban renewal investment while the value of real estate is declining nowadays.