On the use of the Financial Option Price Model to Value and Explain Vacant Urban Land

  • Geltner D
  • 16

    Readers

    Mendeley users who have this article in their library.
  • 18

    Citations

    Citations of this article.

Abstract

This paper reviews the financial option model of under-utilizing urban land, with primary attention to the question of whether and how the model might move beyond the academic realm toward practical and quantitative applications. It is argued that the theoretical underpinnings that give the option model such power in the financial securities field do not extend to such land applications, making it more important to justify the model empirically. Numerical analysis using a "decision analysis" type model of land option value used in the paper to help guide and focus such empirical study. It is noted that while the option model focuses primary attention on uncertainty in future building values as the cause of land being undeveloped, previous deterministic models focused on expected future growth in values as the main cause for land speculation. As these two causes can have different empirical analysis to gauge their relative importance. A strategy for empirically testing the option model of land is suggested, and concludes that definitive empirical tests will be difficult to achieve, in part because of the subjective nature of many of the model inputs. [ABSTRACT FROM AUTHOR]

Get free article suggestions today

Mendeley saves you time finding and organizing research

Sign up here
Already have an account ?Sign in

Find this document

Authors

  • David Geltner

Cite this document

Choose a citation style from the tabs below

Save time finding and organizing research with Mendeley

Sign up for free