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Brownfield Redevelopment Evaluation Based on Fuzzy Real Options

Author

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  • Hongjun Dai

    (College of Economic and Management, Nanjing University of Aeronautics and Astronautics, Nanjing 211106, China
    College of Economic and Management, Huainan Normal University, Huainan 232000, 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)

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.

Suggested Citation

  • Hongjun Dai & Tao Sun & Wen Guo, 2016. "Brownfield Redevelopment Evaluation Based on Fuzzy Real Options," Sustainability, MDPI, vol. 8(2), pages 1-10, February.
    • Handle: RePEc:gam:jsusta:v:8:y:2016:i:2:p:170-:d:63910
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    References listed on IDEAS

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    Cited by:

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    3. Yongrok Choi & Malin Song & Seunghwan Myeong, 2016. "Introduction to the Special Issue on the Sustainable Asia Conference 2015," Sustainability, MDPI, vol. 8(3), pages 1-9, March.

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