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Placing the power of real options analysis into the hands of natural resource managers - taking the next step

Citation

Nelson, R and Howden, M and Hayman, P, Placing the power of real options analysis into the hands of natural resource managers - taking the next step, Journal of Environmental Management, 124 pp. 128-136. ISSN 0301-4797 (2013) [Refereed Article]

Copyright Statement

Copyright 2013 Elsevier Ltd.

DOI: doi:10.1016/j.jenvman.2013.03.031

Abstract

This paper explores heuristic methods with potential to place the analytical power of real options analysis into the hands of natural resource managers. The complexity of real options analysis has led to patchy or ephemeral adoption even by corporate managers familiar with the financial-market origins of valuation methods. Intuitively accessible methods for estimating the value of real options have begun to evolve, but their evaluation has mostly been limited to researcher-driven applications. In this paper we work closely with Bush Heritage Australia to evaluate the potential of real options analysis to support the intuitive judgement of conservation estate managers in covenanting land with uncertain future conservation value due to climate change. The results show that modified decision trees have potential to estimate the option value of covenanting individual properties while time and ongoing research resolves their future conservation value. Complementing this, Luehrman’s option space has potential to assist managers with limited budgets to increase the portfolio value of multiple properties with different conservation attributes.

Item Details

Item Type:Refereed Article
Keywords:real options, climate change, covenants, decision support, natural resource management
Research Division:Environmental Sciences
Research Group:Environmental Science and Management
Research Field:Natural Resource Management
Objective Division:Economic Framework
Objective Group:Microeconomics
Objective Field:Industry Policy
Author:Nelson, R (Associate Professor Rohan Nelson)
ID Code:84788
Year Published:2013
Web of Science® Times Cited:6
Deposited By:Tasmanian Institute of Agriculture
Deposited On:2013-05-31
Last Modified:2014-04-04
Downloads:0

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