The Pricing of Embedded Options in Real Estate Lease Contracts

@inproceedings{Buetow1998ThePO,
  title={The Pricing of Embedded Options in Real Estate Lease Contracts},
  author={Gerald W. Buetow and Joseph Albert},
  year={1998}
}
Leases and rental agreements often have options attached or embedded in them. These options sometimes depend on a number of economic variables such as the Consumer Price Index (CPI), a real estate index and/or the value of real estate underlying the agreement. The evaluation of these options often involves the solution or approximation to a partial differential equation (PDE). This study analyzes the appropriate PDEs which model the situation where the lessee is granted an option to either… CONTINUE READING