Pricing Upward-Only Adjusting Leases
Brent Ambrose,
Patric H. Hendershott and
Malgorzata M. Klosek
No 7622, NBER Working Papers from National Bureau of Economic Research, Inc
Abstract:
This paper presents a stochastic pricing model of a unique, path-dependent lease instrument common in the United Kingdom and numerous commonwealth countries, the upward-only adjusting lease. In this lease, the rental rate is fixed at lease commencement but will be reset to the market rate at predetermined intervals (usually every five years) if it exceeds the contract rent. Numerical results indicate how the initial coupon rate should be set relative to that on a symmetric up-and-downward adjusting variable rate' lease under various economic conditions (level of real interest rates and expected drift and volatility of the underlying rental service flow). We also consider the calculation of effective rents when free rent periods are given during either a market collapse or a steady-state drift.
JEL-codes: G12 R0 (search for similar items in EconPapers)
Date: 2000-03
Note: AP
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)
Published as Ambrose, Brent W., Patric H. Hendershott and Malgorzata M. Klosek. "Pricing Upward-Only Adjusting Leases," Journal of Real Estate Finance and Economics, 2002, v25(1,Jul), 33-49.
Downloads: (external link)
http://www.nber.org/papers/w7622.pdf (application/pdf)
Related works:
Journal Article: Pricing Upward-Only Adjusting Leases (2002) 
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:nbr:nberwo:7622
Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w7622
Access Statistics for this paper
More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().