Purpose – This paper aims to test the robustness of the trend and volatility estimations for two indices: the classical Weighted Repeat Sales and a PCA factorial index. The estimations are computed from a dataset of Paris commercial properties. Design/methodology/approach – First, two...

Purpose – The purpose of this paper is to demonstrate the impact of lease duration and lease break options on the optimal holding period for a real estate asset or portfolio. Design/methodology/approach – The authors use a Monte Carlo simulation framework to simulate a real estate asset’s...

Purpose – The aim of this paper is to use rent and price dynamics in the future cash flows in order to improve real estate portfolio valuation. Design/methodology/approach – Monte Carlo simulation methods are employed for the measurement of complex cash generating assets such as real estate...

In this paper we address the issue of measuring price performance for the Paris residential market. Our main focus is on choosing the appropiate index or indices capable of efficiently capturing capital growth, capital risk, and identifying the main risk factors inherent in this specific...

This paper addresses the issue of building a repeat sales index based on explanatory factors. An earlier paper (Baroni, Barthe´le´my, and Mokrane, 2004), built a factorial index based on a selected linear function of economic and financial variables. Here, a more general and robust model...

This paper considers the use of options in real estate risk financing and investment. A model similar to Black and Cox (1976) for pricing senior-junior debt claims is presented and proved useful for pricing outside debt financing in the context of real estate risk. Next, Quigg's (1993) strategic...

This paper considers the use of simulated cash flows to value assets and options in assets in real estate investment. We motivate the use of Monte-Carlo simulation methods for the measurement of complex cash generating assets such as real estate assets return distribution. Important simulation...