Keywords and Phrases
Leasing; Price Risk; Real options; Risk management
"Uncertainty poses not only threats but also opportunities. This study sought to build the scientific foundation for introducing a real options (ROs) methodology for price risk management to the leasing industry. A price risk management that allows for both coping with threats and taking advantage of opportunities. In the leasing industry, fixed rate long-term lease contracts help contract parties stabilize cash flows within volatile markets. The contract's term, however, may be extended long enough that prevent capturing the opportunities of gaining greater profits or reducing expenses. Therefore, the flexibility that enables participants to take advantage of favorable market price is desirable.
This discussion is dedicated to the study of three different forms of price adjustments flexibility: 1) single-sided price adjustment flexibility (SSPAF). 2) double-sided price adjustment flexibility (DSPAF) with the preemptive right to exercise. 3) DSPAF with the non-preemptive right to exercise. Each was designed to meet various participants flexibility requirements and budgets. An ROs methodology was developed to model, price, and optimize these flexibility clauses. The proposed approach was then tested in the example of Time Charter (TC) rate contracts from the maritime transport industry. Both the metric and the process for quantifying the benefit of the proposed flexibility clauses are provided.
This work provides an alternative approach to the price risk management, which is accessible to all participants in the leasing industry. It is also the starting point in studying the multiple-party, multiple-exercisable price adjustment flexibility. Moreover, both the flexibility designs and the proposed ROs methodology for price risk management are applicable to not only other forms of lease contracts but also to other forms of contract relationships."--Abstract, page iii.
Enke, David Lee, 1965-
Long, Suzanna, 1961-
Raper, Stephen A.
Engineering Management and Systems Engineering
Ph. D. in Engineering Management
Missouri University of Science and Technology
ix, 111 pages
© 2013 Ahmed A. A. Al sharif, All rights reserved.
Dissertation - Open Access
Library of Congress Subject Headings
Lease and rental services -- Prices
Real options (Finance)
Electronic OCLC #
Al sharif, Ahmed, "Real options modeling and valuation of price adjustment flexibility with an application to the leasing industry" (2013). Doctoral Dissertations. 2600.