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THE OPTION VALUE OF FOREST CONCESSIONS IN AMAZON RESERVES

Forest Lease in Legal Amazon - Overview. Brazilian Government : Planning to implement Natural Forest concession in Legal Amazon Legal Amazon : 500 millions hectares Volume estimated :60 billions m3 of wood Annual production : 25 millions m3 of wood Area for l

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THE OPTION VALUE OF FOREST CONCESSIONS IN AMAZON RESERVES

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    1. THE OPTION VALUE OF FOREST CONCESSIONS IN AMAZON RESERVES Good afternoon. IPEA is a research institute from Brazilian Government whose primary objective is to provide technical assistance to Brazilian Ministry of Planning and Budget. We develop Mathematical Models including applications of Real Option Theory, Stochastic Dynamic Programming, Monte Carlo Simulation and Numerical Calculus to support Government decision analysis. The objective of this study is to suggest and apply the ROT as a proper methodology to value the forest concessions in Legal Amazon and compare the results with the traditional NPV methodology which is the current methodology still employee to price such concessions in Brazil Good afternoon. IPEA is a research institute from Brazilian Government whose primary objective is to provide technical assistance to Brazilian Ministry of Planning and Budget. We develop Mathematical Models including applications of Real Option Theory, Stochastic Dynamic Programming, Monte Carlo Simulation and Numerical Calculus to support Government decision analysis. The objective of this study is to suggest and apply the ROT as a proper methodology to value the forest concessions in Legal Amazon and compare the results with the traditional NPV methodology which is the current methodology still employee to price such concessions in Brazil

    2. Forest Lease in Legal Amazon - Overview

    6. Spatial Econometric Model

    7. Spatial Econometric Model

    8. Concession Value under Uncertainty over Current Timber Inventory

    9. Timber Prices

    10. Timber Prices

    11. Timber Price Stochastic Process.

    12. Timber Price Estimates

    13. Timber Inventory Stochastic Process

    15. Optimality Equation

    16. Boundary Conditions and Constraints - MSS (1989)

    17. Concession Value F ($/ha) X Time to Maturity (T) at t = 0

    19. Inventory Uncertainty sensitivity analysis

    20. ROT X NPV

    21. Concluding Remarks

    22. Support Material

    23. Model Results

    24. Model Results

    25. Stochastic NPV

    26. Real Options on Renewable Resources -Literature-

    27. Real Options on Renewable Resources -Literature-

    28. Real Options on Renewable Resources -Literature-

    29. Concession Value ($/ha) X discount rate (r - %year)

    30. Numerical Techniques

    31. Finite Difference Method

    34. Discretization Process

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