USING OF REAL OPTIONS IN PROJECT FINANCING WITH LEASED ASSETS

Abstract

In the conditions of the growing competition and growth of number of ahead of schedule terminated leasing transactions lessors need to predict correctly the probable financial risks connected with uncertain behavior of all participants of the project. The built-in real options can provide this protection against financial risks to the leasing companies. The present study examines the applicability of main types of real options in project financing with leased assets, as well as conditions imposed on the leased assets and the project itself. This article describes particularities of real option valuation if underlying asset is a leased asset. This article includes analysis of leased assets residual value predictability and presents ways how to estimate it correctly.

Keywords

• real options
• leased assets
• binominal model
• project financing
• embedded options