I need to value a real option. It is the possibility for a tenant to purchase a piece of real estate that is currently on lease for a strike price that is adjusted each year based on inflation. I know the volatility and discount rate for the value of the property. The option can be exercised in year 5, 10, 15, or 20. There is a given amount of capex each year associated with the property to keep it well-maintained. The rent on the property increases at the same rate as the strike price, the inflation rate.
Is there a way to value this using Black Scholes or another option pricing model? I am really confused as to how to incorporate the variable strike price and multiple exercise dates. I know there aren't too many people here, but I will give awards to the best comment. Thanks!
UPDATE: Solved by modelling it as 4 seperate european call options and setting the value of each to the present value. I did it with the binomial model by creating a binomal random variable under John Hull's method, and with the Black-Scholes method.
How come the videogame Stock is sitting at a circa 8 billion valuation with some 4 billion in revenue a year,and its called a crazy valuation whereas things like Zoom or Snap have an 80 billion Market Cap with a measly revenue of 1 billion (Zoom) and its a normal or not so crazy valuation.
Looking to learn more about "real options" valuation. To be completely honest I don't know anything about it right now, so any sources you can recommend would be appreciated. Books, websites, research papers, etc.
From a quantitative perspective, investing in real estate is almost equal to investing your finances in stocks. It’s vital for an investor to have the knowledge of how to value the property and make a calculative guess on what the expected return on the investment would be. This accuracy of information will help you as an investor make better decisions.
This 4-day online program is designed to help you learn how to recognize the economic value of the property, understand the key metrics for valuing the income-producing property and how to measure the profitability of your investment.
I gave my interview and I think I did well. But will the internship affect/benefit me to land equity research position after my uni??
