Valuation for a Preemptive Right on the Private House for Lease in Korea Using the Binomial Option Pricing Model

Sung Tak Kim (Sangji University)

Journal of Derivatives and Quantitative Studies: 선물연구

ISSN: 1229-988X

Article publication date: 31 May 2008

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Abstract

This paper investigates the value for a preemptive right on the private houses for lease in Korea which were supplied at Pankyo and Heoungduk Area in February 2006 and May 2007.

Using the price of the houses in the neighborhood area. Bundang and Youngtong as proxy variable, we estimated the value of a preemptive right based on the binomial option pricing model.

Major results are summarized as follows: i. While a purchase of right for the case of Pankyo were profitable, the case of Heoungduk wasn't which was consistent with the historical competition results; ii. while the profitability for the Pankyo was stable across the variation of the parameters, Heoungduk was not. Finally, some policy implications and limitations of this paper were suggested.

Keywords

Citation

Kim, S.T. (2008), "Valuation for a Preemptive Right on the Private House for Lease in Korea Using the Binomial Option Pricing Model", Journal of Derivatives and Quantitative Studies: 선물연구, Vol. 16 No. 1, pp. 69-86. https://doi.org/10.1108/JDQS-01-2008-B0004

Publisher

:

Emerald Publishing Limited

Copyright © 2008 Emerald Publishing Limited

License

This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode


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