Forest Land Valuation Using the Real Options Methodology

Abstract

Even though the real options methodology is commonly used to value forests, no work has been found in the literature that takes into account Czech legislation when using this method. The Forest Act sets the earliest possible point of harvesting a forest at the moment when the trees reach 80 years of age. As a result of this restriction, flexibility is lost and therefore the forest's density is reduced. The aim of the thesis is to quantify the loss resulting from setting the harvesting limit compared to a situation where forest harvesting is unrestricted by law, assuming a valuation according to the real options methodology.