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The Pricing of Land Options

Author

Listed:
  • Robert L. Brown

    (Faculty of Economics and Politics, Monash University, Melbourne, Australia)

  • Dominique Achour

    (Faculté des Sciences de l'Administration, Université Laval, Québec. Canada)

Abstract

Valuation principles which have been found useful in the study of stock options are applied to the pricing of options to purchase real property ('land options'). There is a close similarity between fixed land options and call options on common stock. This similarity is used to saggest ways in which fixed land options might be valued. More complex land options (step-up, full credit and renewable) are also analyzed.

Suggested Citation

  • Robert L. Brown & Dominique Achour, 1984. "The Pricing of Land Options," Urban Studies, Urban Studies Journal Limited, vol. 21(3), pages 317-323, August.
    • Handle: RePEc:sae:urbstu:v:21:y:1984:i:3:p:317-323
    DOI: 10.1080/00420988420080571
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    References listed on IDEAS

    as
    1. Galai, Dan, 1977. "Characterization of options," Journal of Banking & Finance, Elsevier, vol. 1(4), pages 373-385, December.
    2. Geske, Robert, 1979. "The valuation of compound options," Journal of Financial Economics, Elsevier, vol. 7(1), pages 63-81, March.
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    4. Robert C. Merton, 2005. "Theory of rational option pricing," World Scientific Book Chapters, in: Sudipto Bhattacharya & George M Constantinides (ed.), Theory Of Valuation, chapter 8, pages 229-288, World Scientific Publishing Co. Pte. Ltd..
    5. Geske, Robert, 1977. "The Valuation of Corporate Liabilities as Compound Options," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 12(4), pages 541-552, November.
    6. Merton, Robert C, 1974. "On the Pricing of Corporate Debt: The Risk Structure of Interest Rates," Journal of Finance, American Finance Association, vol. 29(2), pages 449-470, May.
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    Citations

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    Cited by:

    1. L.M. Farrell, 1988. "Hedged Real Estate Portfolios and the Wealth Redistribution Effect of Real Estate Option," Urban Studies, Urban Studies Journal Limited, vol. 25(6), pages 507-519, December.
    2. Lim, Terence & Lo, Andrew W. & Merton, Robert C. & Scholes, Myron S., 2006. "The Derivatives Sourcebook," Foundations and Trends(R) in Finance, now publishers, vol. 1(5–6), pages 365-572, April.
    3. Dominique Achour & Robert Brown, 1984. "Un marche d'options sur indice de prix fonciers: nouvel instrument d'une politique de l'habitition. (With English summary.)," Canadian Public Policy, University of Toronto Press, vol. 10(3), pages 287-295, September.
    4. Max Neutze, 1987. "The Supply of Land for a Particular Use," Urban Studies, Urban Studies Journal Limited, vol. 24(5), pages 379-388, October.

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