Brownfield Redevelopment Evaluation Based on Fuzzy Real Options

Hongjun Dai, Tao Sun and Wen Guo
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Hongjun Dai: College of Economic and Management, Nanjing University of Aeronautics and Astronautics, Nanjing 211106, China
Tao Sun: College of Economic and Management, Nanjing University of Aeronautics and Astronautics, Nanjing 211106, China
Wen Guo: College of Economic and Management, Nanjing University of Aeronautics and Astronautics, Nanjing 211106, China

Sustainability, 2016, vol. 8, issue 2, 1-10

Abstract: There are a great amount of brownfield in Chinese mining cities. In order to promote mining cities sustainable development, it is necessary to redevelop brownfield. There is a great deal of uncertainty in the process of brownfield redevelopment owing to the influences of pollution. Normal fuzzy numbers were used to describe the fuzziness of the expected DCF (discounted cash flow) value of brownfield redevelopment projects. In view of experts’ preferences, the weight of fuzzed estimation intervals of the expected DCF value was determined by means of the lattice closeness degree to find the volatility of the expected DCF value. Combining the results with the B-S (Black-Scholes) real option model, we built a fuzzy real option model which could be applied to the brownfield redevelopment projects. The empirical results showed that the valuation results of the fuzzy real option model, considering the experts’ risk preferences, were relatively objective and accurate.

Keywords: mining city; sustainable development; brownfield redevelopment; fuzzy real option; normal fuzzy number (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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