Forest management decision making based on a real options approach: An application to a case in northeastern Argentina

Autores
Broz, Diego Ricardo; Milanesi, Gastón; Rossit, Daniel Alejandro; Rossit, Diego Gabriel; Tohmé, Fernando Abel
Año de publicación
2018
Idioma
inglés
Tipo de recurso
artículo
Estado
versión publicada
Descripción
The Net Present Value (NPV) approach is widely applied to assess forest investments, but this method has serious shortcomings, which we propose to overcome by switching to the assessment through the Real Options Approach (ROA). The model in this paper starts with the simulation of the forest´s growth, combined with the projection of the products´ prices and valuing the assets using a binomial model. We include an option of postponement, determining the optimal period of felling. We find that ROA is more robust than the NPV approach because it relaxes the assumption of constancy of both the prices and the discount rate, allowing the determination of the optimal time of felling based on the growth rate of either the forest or the prices of its products. Contrary to the traditional NPV approach, the results obtained with ROA exhibit longer harvest turns and consequently higher profits. The key variable in the ROA, the Real Option Value (ROV) can be shown to be less (albeit moderately) sensitive to decreases of the discount rate than NPV. Moreover, ROV is moderately sensitive to decreases in the price of logs and is negligibly affected by rises in the costs of harvesting, loading and transporting rolls.
Fil: Broz, Diego Ricardo. Universidad Nacional de Misiones. Facultad de Ciencias Forestales; Argentina. Consejo Nacional de Investigaciones Científicas y Técnicas; Argentina
Fil: Milanesi, Gastón. Universidad Nacional del Sur. Departamento de Ciencias de la Administración; Argentina
Fil: Rossit, Daniel Alejandro. Consejo Nacional de Investigaciones Científicas y Técnicas. Centro Científico Tecnológico Conicet - Bahía Blanca. Instituto de Matemática Bahía Blanca. Universidad Nacional del Sur. Departamento de Matemática. Instituto de Matemática Bahía Blanca; Argentina
Fil: Rossit, Diego Gabriel. Consejo Nacional de Investigaciones Científicas y Técnicas. Centro Científico Tecnológico Conicet - Bahía Blanca. Instituto de Investigaciones Económicas y Sociales del Sur. Universidad Nacional del Sur. Departamento de Economía. Instituto de Investigaciones Económicas y Sociales del Sur; Argentina
Fil: Tohmé, Fernando Abel. Consejo Nacional de Investigaciones Científicas y Técnicas. Centro Científico Tecnológico Conicet - Bahía Blanca. Instituto de Matemática Bahía Blanca. Universidad Nacional del Sur. Departamento de Matemática. Instituto de Matemática Bahía Blanca; Argentina. Universidad Nacional del Sur. Departamento de Economía; Argentina
Materia
BINOMIAL MODEL
BINOMIAL TREE
REAL OPTIONS
Nivel de accesibilidad
acceso abierto
Condiciones de uso
https://creativecommons.org/licenses/by-nc-nd/2.5/ar/
Repositorio
CONICET Digital (CONICET)
Institución
Consejo Nacional de Investigaciones Científicas y Técnicas
OAI Identificador
oai:ri.conicet.gov.ar:11336/89526
Acceder
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spelling Forest management decision making based on a real options approach: An application to a case in northeastern ArgentinaBroz, Diego RicardoMilanesi, GastónRossit, Daniel AlejandroRossit, Diego GabrielTohmé, Fernando AbelBINOMIAL MODELBINOMIAL TREEREAL OPTIONShttps://purl.org/becyt/ford/5.2https://purl.org/becyt/ford/5The Net Present Value (NPV) approach is widely applied to assess forest investments, but this method has serious shortcomings, which we propose to overcome by switching to the assessment through the Real Options Approach (ROA). The model in this paper starts with the simulation of the forest´s growth, combined with the projection of the products´ prices and valuing the assets using a binomial model. We include an option of postponement, determining the optimal period of felling. We find that ROA is more robust than the NPV approach because it relaxes the assumption of constancy of both the prices and the discount rate, allowing the determination of the optimal time of felling based on the growth rate of either the forest or the prices of its products. Contrary to the traditional NPV approach, the results obtained with ROA exhibit longer harvest turns and consequently higher profits. The key variable in the ROA, the Real Option Value (ROV) can be shown to be less (albeit moderately) sensitive to decreases of the discount rate than NPV. Moreover, ROV is moderately sensitive to decreases in the price of logs and is negligibly affected by rises in the costs of harvesting, loading and transporting rolls.Fil: Broz, Diego Ricardo. Universidad Nacional de Misiones. Facultad de Ciencias Forestales; Argentina. Consejo Nacional de Investigaciones Científicas y Técnicas; ArgentinaFil: Milanesi, Gastón. Universidad Nacional del Sur. Departamento de Ciencias de la Administración; ArgentinaFil: Rossit, Daniel Alejandro. Consejo Nacional de Investigaciones Científicas y Técnicas. Centro Científico Tecnológico Conicet - Bahía Blanca. Instituto de Matemática Bahía Blanca. Universidad Nacional del Sur. Departamento de Matemática. Instituto de Matemática Bahía Blanca; ArgentinaFil: Rossit, Diego Gabriel. Consejo Nacional de Investigaciones Científicas y Técnicas. Centro Científico Tecnológico Conicet - Bahía Blanca. Instituto de Investigaciones Económicas y Sociales del Sur. Universidad Nacional del Sur. Departamento de Economía. Instituto de Investigaciones Económicas y Sociales del Sur; ArgentinaFil: Tohmé, Fernando Abel. Consejo Nacional de Investigaciones Científicas y Técnicas. Centro Científico Tecnológico Conicet - Bahía Blanca. Instituto de Matemática Bahía Blanca. Universidad Nacional del Sur. Departamento de Matemática. Instituto de Matemática Bahía Blanca; Argentina. Universidad Nacional del Sur. Departamento de Economía; ArgentinaDe Gruyter Open Ltd2018-04-25info:eu-repo/semantics/articleinfo:eu-repo/semantics/publishedVersionhttp://purl.org/coar/resource_type/c_6501info:ar-repo/semantics/articuloapplication/pdfapplication/pdfapplication/pdfapplication/pdfapplication/pdfapplication/pdfhttp://hdl.handle.net/11336/89526Broz, Diego Ricardo; Milanesi, Gastón; Rossit, Daniel Alejandro; Rossit, Diego Gabriel; Tohmé, Fernando Abel; Forest management decision making based on a real options approach: An application to a case in northeastern Argentina; De Gruyter Open Ltd; Forestry Studies; 67; 1; 25-4-2018; 97-1081736-8723CONICET DigitalCONICETenginfo:eu-repo/semantics/altIdentifier/url/https://content.sciendo.com/configurable/contentpage/journals$002ffsmu$002f67$002f1$002farticle-p97.xmlinfo:eu-repo/semantics/altIdentifier/doi/10.1515/fsmu-2017-0015info:eu-repo/semantics/openAccesshttps://creativecommons.org/licenses/by-nc-nd/2.5/ar/reponame:CONICET Digital (CONICET)instname:Consejo Nacional de Investigaciones Científicas y Técnicas2025-09-03T10:01:51Zoai:ri.conicet.gov.ar:11336/89526instacron:CONICETInstitucionalhttp://ri.conicet.gov.ar/Organismo científico-tecnológicoNo correspondehttp://ri.conicet.gov.ar/oai/requestdasensio@conicet.gov.ar; lcarlino@conicet.gov.arArgentinaNo correspondeNo correspondeNo correspondeopendoar:34982025-09-03 10:01:51.833CONICET Digital (CONICET) - Consejo Nacional de Investigaciones Científicas y Técnicasfalse
dc.title.none.fl_str_mv Forest management decision making based on a real options approach: An application to a case in northeastern Argentina
title Forest management decision making based on a real options approach: An application to a case in northeastern Argentina
spellingShingle Forest management decision making based on a real options approach: An application to a case in northeastern Argentina
Broz, Diego Ricardo
BINOMIAL MODEL
BINOMIAL TREE
REAL OPTIONS
title_short Forest management decision making based on a real options approach: An application to a case in northeastern Argentina
title_full Forest management decision making based on a real options approach: An application to a case in northeastern Argentina
title_fullStr Forest management decision making based on a real options approach: An application to a case in northeastern Argentina
title_full_unstemmed Forest management decision making based on a real options approach: An application to a case in northeastern Argentina
title_sort Forest management decision making based on a real options approach: An application to a case in northeastern Argentina
dc.creator.none.fl_str_mv Broz, Diego Ricardo
Milanesi, Gastón
Rossit, Daniel Alejandro
Rossit, Diego Gabriel
Tohmé, Fernando Abel
author Broz, Diego Ricardo
author_facet Broz, Diego Ricardo
Milanesi, Gastón
Rossit, Daniel Alejandro
Rossit, Diego Gabriel
Tohmé, Fernando Abel
author_role author
author2 Milanesi, Gastón
Rossit, Daniel Alejandro
Rossit, Diego Gabriel
Tohmé, Fernando Abel
author2_role author
author
author
author
dc.subject.none.fl_str_mv BINOMIAL MODEL
BINOMIAL TREE
REAL OPTIONS
topic BINOMIAL MODEL
BINOMIAL TREE
REAL OPTIONS
purl_subject.fl_str_mv https://purl.org/becyt/ford/5.2
https://purl.org/becyt/ford/5
dc.description.none.fl_txt_mv The Net Present Value (NPV) approach is widely applied to assess forest investments, but this method has serious shortcomings, which we propose to overcome by switching to the assessment through the Real Options Approach (ROA). The model in this paper starts with the simulation of the forest´s growth, combined with the projection of the products´ prices and valuing the assets using a binomial model. We include an option of postponement, determining the optimal period of felling. We find that ROA is more robust than the NPV approach because it relaxes the assumption of constancy of both the prices and the discount rate, allowing the determination of the optimal time of felling based on the growth rate of either the forest or the prices of its products. Contrary to the traditional NPV approach, the results obtained with ROA exhibit longer harvest turns and consequently higher profits. The key variable in the ROA, the Real Option Value (ROV) can be shown to be less (albeit moderately) sensitive to decreases of the discount rate than NPV. Moreover, ROV is moderately sensitive to decreases in the price of logs and is negligibly affected by rises in the costs of harvesting, loading and transporting rolls.
Fil: Broz, Diego Ricardo. Universidad Nacional de Misiones. Facultad de Ciencias Forestales; Argentina. Consejo Nacional de Investigaciones Científicas y Técnicas; Argentina
Fil: Milanesi, Gastón. Universidad Nacional del Sur. Departamento de Ciencias de la Administración; Argentina
Fil: Rossit, Daniel Alejandro. Consejo Nacional de Investigaciones Científicas y Técnicas. Centro Científico Tecnológico Conicet - Bahía Blanca. Instituto de Matemática Bahía Blanca. Universidad Nacional del Sur. Departamento de Matemática. Instituto de Matemática Bahía Blanca; Argentina
Fil: Rossit, Diego Gabriel. Consejo Nacional de Investigaciones Científicas y Técnicas. Centro Científico Tecnológico Conicet - Bahía Blanca. Instituto de Investigaciones Económicas y Sociales del Sur. Universidad Nacional del Sur. Departamento de Economía. Instituto de Investigaciones Económicas y Sociales del Sur; Argentina
Fil: Tohmé, Fernando Abel. Consejo Nacional de Investigaciones Científicas y Técnicas. Centro Científico Tecnológico Conicet - Bahía Blanca. Instituto de Matemática Bahía Blanca. Universidad Nacional del Sur. Departamento de Matemática. Instituto de Matemática Bahía Blanca; Argentina. Universidad Nacional del Sur. Departamento de Economía; Argentina
description The Net Present Value (NPV) approach is widely applied to assess forest investments, but this method has serious shortcomings, which we propose to overcome by switching to the assessment through the Real Options Approach (ROA). The model in this paper starts with the simulation of the forest´s growth, combined with the projection of the products´ prices and valuing the assets using a binomial model. We include an option of postponement, determining the optimal period of felling. We find that ROA is more robust than the NPV approach because it relaxes the assumption of constancy of both the prices and the discount rate, allowing the determination of the optimal time of felling based on the growth rate of either the forest or the prices of its products. Contrary to the traditional NPV approach, the results obtained with ROA exhibit longer harvest turns and consequently higher profits. The key variable in the ROA, the Real Option Value (ROV) can be shown to be less (albeit moderately) sensitive to decreases of the discount rate than NPV. Moreover, ROV is moderately sensitive to decreases in the price of logs and is negligibly affected by rises in the costs of harvesting, loading and transporting rolls.
publishDate 2018
dc.date.none.fl_str_mv 2018-04-25
dc.type.none.fl_str_mv info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
http://purl.org/coar/resource_type/c_6501
info:ar-repo/semantics/articulo
format article
status_str publishedVersion
dc.identifier.none.fl_str_mv http://hdl.handle.net/11336/89526
Broz, Diego Ricardo; Milanesi, Gastón; Rossit, Daniel Alejandro; Rossit, Diego Gabriel; Tohmé, Fernando Abel; Forest management decision making based on a real options approach: An application to a case in northeastern Argentina; De Gruyter Open Ltd; Forestry Studies; 67; 1; 25-4-2018; 97-108
1736-8723
CONICET Digital
CONICET
url http://hdl.handle.net/11336/89526
identifier_str_mv Broz, Diego Ricardo; Milanesi, Gastón; Rossit, Daniel Alejandro; Rossit, Diego Gabriel; Tohmé, Fernando Abel; Forest management decision making based on a real options approach: An application to a case in northeastern Argentina; De Gruyter Open Ltd; Forestry Studies; 67; 1; 25-4-2018; 97-108
1736-8723
CONICET Digital
CONICET
dc.language.none.fl_str_mv eng
language eng
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info:eu-repo/semantics/altIdentifier/doi/10.1515/fsmu-2017-0015
dc.rights.none.fl_str_mv info:eu-repo/semantics/openAccess
https://creativecommons.org/licenses/by-nc-nd/2.5/ar/
eu_rights_str_mv openAccess
rights_invalid_str_mv https://creativecommons.org/licenses/by-nc-nd/2.5/ar/
dc.format.none.fl_str_mv application/pdf
application/pdf
application/pdf
application/pdf
application/pdf
application/pdf
dc.publisher.none.fl_str_mv De Gruyter Open Ltd
publisher.none.fl_str_mv De Gruyter Open Ltd
dc.source.none.fl_str_mv reponame:CONICET Digital (CONICET)
instname:Consejo Nacional de Investigaciones Científicas y Técnicas
reponame_str CONICET Digital (CONICET)
collection CONICET Digital (CONICET)
instname_str Consejo Nacional de Investigaciones Científicas y Técnicas
repository.name.fl_str_mv CONICET Digital (CONICET) - Consejo Nacional de Investigaciones Científicas y Técnicas
repository.mail.fl_str_mv dasensio@conicet.gov.ar; lcarlino@conicet.gov.ar
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