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Risk Analysis and Asset Valuation: A Monte Carlo Simulation Using Stochastic Rents

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  • Hughes, William T

Abstract

Introduction of the Present Value Distribution Model (PVD) offers an alternative method for the valuation of projects yielding intertemporal stochastic rents. A combination of concepts from many areas of the literature yields the given model. The base procedure relies on Monte Carlo Simulation with the application of recently established theories on stochastic rents, path dependent cash-flow trajectories and period dependent determination. Risk discounting is applied to the resultant of the distribution model rather than within the model. Furthermore, the present value distributions are independent of analyst's perceptions yielding an objective single period gamble. Copyright 1995 by Kluwer Academic Publishers

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  • Hughes, William T, 1995. "Risk Analysis and Asset Valuation: A Monte Carlo Simulation Using Stochastic Rents," The Journal of Real Estate Finance and Economics, Springer, vol. 11(2), pages 177-187, September.
    • Handle: RePEc:kap:jrefec:v:11:y:1995:i:2:p:177-87
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    Cited by:

    1. Hendershott, Patric H & Ward, Charles W R, 2003. "Valuing and Pricing Retail Leases with Renewal and Overage Options," The Journal of Real Estate Finance and Economics, Springer, vol. 26(2-3), pages 223-240, March-May.
    2. João da Rocha Lima & Cláudio Tavares de Alencar, 2006. "Os Atributos Do Mercado Brasileiro De Empreendimentos De Base Imobiliária Para Captar Recursos De Investidores Estrangeiros," LARES lares_2006_artigo-claudio, Latin American Real Estate Society (LARES).
    3. Goran Karanovic & Bisera Gjosevska, 2012. "Analysis of Risk and Uncertainty Using Monte Carlo Simulation and its Influence on Project Realization," Annals - Economic and Administrative Series -, Faculty of Business and Administration, University of Bucharest, vol. 6(1), pages 145-162, December.
    4. Erika Meins & Daniel Sager, 2013. "Sustainability and Risk: Towards a Risk-Based Sustainability Rating for Real Estate Investments," ERES eres2013_254, European Real Estate Society (ERES).
    5. Werner Gleißner & Tobias Just & Endre Kamarás, 2017. "Simulationsbasierter Ertragswert als Ergänzung zum Verkehrswert [Simulation-based earnings value as a supplement to the market value]," Zeitschrift für Immobilienökonomie (German Journal of Real Estate Research), Springer;Gesellschaft für Immobilienwirtschaftliche Forschung e. V., vol. 3(1), pages 21-48, April.
    6. Serhat Basdogan & Hilde Remøy & Ruud Binnekamp, 2018. "Valuation Construction Permit Uncertainties in Real Estate Development Projects with Stochastic Decision Tree Analysis," ERES eres2018_265, European Real Estate Society (ERES).
    7. Rose, Simon, 1998. "Valuation of Interacting Real Options in a Tollroad Infrastructure Project," The Quarterly Review of Economics and Finance, Elsevier, vol. 38(3, Part 2), pages 711-723.

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