The Use of Options Pricing to Value the Bare Dominium of Property with Long Leases

Douw G.B. Boshoff

Journal of Real Estate Literature, 2016, vol. 24, issue 2, 251-274

Abstract: Option pricing theory is familiar in the property market with studies that consider the methodology for the pricing of mortgages, development land, idle time, property stocks, lease options and other optionality with regard to design or use. It has not, to date, been generally considered as an alternative pricing method for income producing property as a financial investment. In this study, I investigate the use of options pricing theory to value long-term leases and provide a basis to deal with the uncertainty of future market changes that normally makes such valuation problematic. This has specific application to valuing the interests of the property owner in a property with a long-term land lease, whereby the income rights from the property are in the hands of the lease holder, also referred to as the bare dominium.

Date: 2016
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/10835547.2016.12090427 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:rjelxx:v:24:y:2016:i:2:p:251-274

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/rjel20

DOI: 10.1080/10835547.2016.12090427

Access Statistics for this article

Journal of Real Estate Literature is currently edited by Sophia Dermisi and Kimberly Winson

More articles in Journal of Real Estate Literature from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().