Price modeling of eucalyptus wood under different silvicultural management for real options approach
Choosing the ideal number of rotations of planted forests under a silvicultural management regime results in uncertainties in the cash flows of forest investment projects. We verified if there is parity in the Eucalyptus wood price modeling through fractional Brownian motion and geometric Brownian m...
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| Format: | Article |
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MDPI
2022
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| _version_ | 1811137623598563328 |
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| author | Munis, Rafaele Almeida Camargo, Diego Aparecido Da Silva, Richardson Barbosa Gomes Tsunemi, Miriam Harumi Ibrahim, Siti Nur Iqmal Simões, Danilo |
| author_facet | Munis, Rafaele Almeida Camargo, Diego Aparecido Da Silva, Richardson Barbosa Gomes Tsunemi, Miriam Harumi Ibrahim, Siti Nur Iqmal Simões, Danilo |
| author_sort | Munis, Rafaele Almeida |
| collection | UPM |
| description | Choosing the ideal number of rotations of planted forests under a silvicultural management regime results in uncertainties in the cash flows of forest investment projects. We verified if there is parity in the Eucalyptus wood price modeling through fractional Brownian motion and geometric Brownian motion to incorporate managerial flexibilities into investment projects in planted forests. We use empirical data from three production cycles of forests planted with Eucalyptus grandis × E. urophylla in the projection of discounted cash flows. The Eucalyptus wood price, assumed as uncertainty, was modeled using fractional and geometric Brownian motion. The discrete-time pricing of European options was obtained using the Monte Carlo method. The root mean square error of fractional and geometric Brownian motions was USD 1.4 and USD 2.2, respectively. The real options approach gave the investment projects, with fractional and geometric Brownian motion, an expanded present value of USD 8,157,706 and USD 9,162,202, respectively. Furthermore, in both models, the optimal harvest ages execution was three rotations. Thus, with an indication of overvaluation of 4.9% when assimilating the geometric Brownian motion, there is no parity between stochastic processes, and three production cycles of Eucalyptus planted forests are economically viable. |
| first_indexed | 2024-09-25T03:37:15Z |
| format | Article |
| id | upm.eprints-102889 |
| institution | Universiti Putra Malaysia |
| last_indexed | 2024-09-25T03:37:15Z |
| publishDate | 2022 |
| publisher | MDPI |
| record_format | dspace |
| spelling | upm.eprints-1028892024-06-23T00:33:48Z http://psasir.upm.edu.my/id/eprint/102889/ Price modeling of eucalyptus wood under different silvicultural management for real options approach Munis, Rafaele Almeida Camargo, Diego Aparecido Da Silva, Richardson Barbosa Gomes Tsunemi, Miriam Harumi Ibrahim, Siti Nur Iqmal Simões, Danilo Choosing the ideal number of rotations of planted forests under a silvicultural management regime results in uncertainties in the cash flows of forest investment projects. We verified if there is parity in the Eucalyptus wood price modeling through fractional Brownian motion and geometric Brownian motion to incorporate managerial flexibilities into investment projects in planted forests. We use empirical data from three production cycles of forests planted with Eucalyptus grandis × E. urophylla in the projection of discounted cash flows. The Eucalyptus wood price, assumed as uncertainty, was modeled using fractional and geometric Brownian motion. The discrete-time pricing of European options was obtained using the Monte Carlo method. The root mean square error of fractional and geometric Brownian motions was USD 1.4 and USD 2.2, respectively. The real options approach gave the investment projects, with fractional and geometric Brownian motion, an expanded present value of USD 8,157,706 and USD 9,162,202, respectively. Furthermore, in both models, the optimal harvest ages execution was three rotations. Thus, with an indication of overvaluation of 4.9% when assimilating the geometric Brownian motion, there is no parity between stochastic processes, and three production cycles of Eucalyptus planted forests are economically viable. MDPI 2022 Article PeerReviewed Munis, Rafaele Almeida and Camargo, Diego Aparecido and Da Silva, Richardson Barbosa Gomes and Tsunemi, Miriam Harumi and Ibrahim, Siti Nur Iqmal and Simões, Danilo (2022) Price modeling of eucalyptus wood under different silvicultural management for real options approach. Forests, 13 (3). art. no. 478. pp. 1-12. ISSN 1999-4907 https://www.mdpi.com/1999-4907/13/3/478 10.3390/f13030478 |
| spellingShingle | Munis, Rafaele Almeida Camargo, Diego Aparecido Da Silva, Richardson Barbosa Gomes Tsunemi, Miriam Harumi Ibrahim, Siti Nur Iqmal Simões, Danilo Price modeling of eucalyptus wood under different silvicultural management for real options approach |
| title | Price modeling of eucalyptus wood under different silvicultural management for real options approach |
| title_full | Price modeling of eucalyptus wood under different silvicultural management for real options approach |
| title_fullStr | Price modeling of eucalyptus wood under different silvicultural management for real options approach |
| title_full_unstemmed | Price modeling of eucalyptus wood under different silvicultural management for real options approach |
| title_short | Price modeling of eucalyptus wood under different silvicultural management for real options approach |
| title_sort | price modeling of eucalyptus wood under different silvicultural management for real options approach |
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