The Value Of The Option To Preserve Farm Real Estate
Contingent Claim, Derivative, Farmland, Preservation, Real Option, Valuation
Journal of Economics and Finance
Agricultural conservation easements consist of deed restrictions that landowners voluntarily place on their farm real estate for any number of reasons including the permanent restriction of development. Purchase of Agricultural Conservation Easement (PACE) programs exist in many States and are used to ensure farm real estate is available for future agricultural use as well as a policy mechanism to control development. Much like the landowner's development option, preservation is a real option exercised at the discretion of the landowner. An analytic contingent claims model is presented to value the landowner's preservation option. An empirical analysis of the model indicates that the option to delay preservation can have significant value. © 2010 Springer Science+Business Media, LLC.
Department of Finance
Original Publication Date
DOI of published version
Stokes, Jeffrey R., "The Value Of The Option To Preserve Farm Real Estate" (2012). Faculty Publications. 1853.