Author(s)

Runrun Dong ¹

Affiliation(s)

¹ Ahmad Sohail, School of Civil Engineering, Henan University of Technology, Zhengzhou, 450001, China

Corresponding Author

Runrun Dong

ABSTRACT

The valuation of real estate investment projects is a highly complex issue. Traditional net present value (NPV) evaluation methods largely depend on estimates of future variables, which are often characterized by certainty. This paper focuses on the characteristic of real estate investment projects that allows for delayed development, establishes project asset volatility, and then constructs a binomial tree option pricing model. Empirical analysis based on the binomial tree model shows that the value of real estate investment projects can be reasonably estimated by continuously adjusting the volatility of the project assets and thereby adjusting the expectations of future income changes.

KEYWORDS

Net Present Value; Option Pricing; Binomial Tree Model; Real Estate Investment Project

CITE THIS PAPER

Runrun Dong, Research on Real Estate Investment Project Valuation Based on the Binomial Tree Model. Financial Engineering and Risk Management (2024) Vol. 7: 26-32. DOI: http://dx.doi.org/10.23977/ferm.2024.070404.

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