Real option pricing in mixed-use development projects

The application of real options theory to commercial real estate has developed rapidly during the last 15 Years. In particular, several pricing models have been applied to value real options embedded in development projects. In this study we use a case study of a mixed use development scheme and identify the major implied and explicit real options available to the developer. We offer the perspective of a real market application by exploring different binomial models and the associated methods of estimating the crucial parameter of volatility. We include simple binomial lattices, quadranomial lattices and demonstrate the sensitivity of the results to the choice of inputs and method.

Inhibition of synaptic transmission and G protein modulation by synthetic CaV2.2 Ca2+ channel peptides

Abstract: Modulation of presynaptic voltage-dependent Ca+ channels is a major means of controlling neurotransmitter release. The CaV 2.2 Ca2+ channel subunit contains several inhibitory interaction sites for Gβγ subunits, including the amino terminal (NT) and I–II loop. The NT and I–II loop have also been proposed to undergo a G protein-gated inhibitory interaction, whilst the NT itself has also been proposed to suppress CaV 2 channel activity. Here, we investigate the effects of an amino terminal (CaV 2.2[45–55]) ‘NT peptide’ and a I–II loop alpha interaction domain (CaV 2.2[377–393]) ‘AID peptide’ on synaptic transmission, Ca2+ channel activity and G protein modulation in superior cervical ganglion neurones (SCGNs). Presynaptic injection of NT or AID peptide into SCGN synapses inhibited synaptic transmission and also attenuated noradrenaline-induced G protein modulation. In isolated SCGNs, NT and AID peptides reduced whole-cell Ca2+ current amplitude, modified voltage dependence of Ca2+ channel activation and attenuated noradrenaline-induced G protein modulation. Co-application of NT and AID peptide negated inhibitory actions. Together, these data favour direct peptide interaction with presynaptic Ca2+ channels, with effects on current amplitude and gating representing likely mechanisms responsible for inhibition of synaptic transmission. Mutations to residues reported as determinants of Ca2+ channel function within the NT peptide negated inhibitory effects on synaptic transmission, Ca2+ current amplitude and gating and G protein modulation. A mutation within the proposed QXXER motif for G protein modulation did not abolish inhibitory effects of the AID peptide. This study suggests that the CaV 2.2 amino terminal and I–II loop contribute molecular determinants for Ca2+ channel function; the data favour a direct interaction of peptides with Ca2+ channels to inhibit synaptic transmission and attenuate G protein modulation. Non-technical summary: Nerve cells (neurones) in the body communicate with each other by releasing chemicals (neurotransmitters) which act on proteins called receptors. An important group of receptors (called G protein coupled receptors, GPCRs) regulate the release of neurotransmitters by an action on the ion channels that let calcium into the cell. Here, we show for the first time that small peptides based on specific regions of calcium ion channels involved in GPCR signalling can themselves inhibit nerve cell communication. We show that these peptides act directly on calcium channels to make them more difficult to open and thus reduce calcium influx into native neurones. These peptides also reduce GPCR-mediated signalling. This work is important in increasing our knowledge about modulation of the calcium ion channel protein; such knowledge may help in the development of drugs to prevent signalling in pathways such as those involved in pain perception.

Pricing the options inherent in leased commercial property: a UK case study

This paper sets out the findings of a group of research and development projects carried out at the Department of Real Estate & Planning at the University of Reading and at Oxford Property Systems over the period 1999 – 2003. The projects have several aims: these are to identify the fundamental drivers of the pricing of different lease terms in the UK property sector; to identify current and best market practice and uncover the main variations in lease terms; to identify key issues in pricing lease terms; and to develop a model for the pricing of rent under a variety of lease variations. From the landlord’s perspective, the main factors driving the required ‘compensation’ for a lease term amendment include expected rental volatility, expected probability of tenant vacation, and the expected costs of tenant vacation. These data are used in conjunction with simulation technology to reflect the options inherent in certain lease types to explore the required rent adjustment. The resulting cash flows have interesting qualities which illustrate the potential importance of option pricing in a non-complex and practical way.

Power transmission network simulation for fault diagnosis

The authors discuss an implementation of an object oriented (OO) fault simulator and its use within an adaptive fault diagnostic system. The simulator models the flow of faults around a power network, reporting switchgear indications and protection messages that would be expected in a real fault scenario. The simulator has been used to train an adaptive fault diagnostic system; results and implications are discussed.

A simplified pricing model for volatility futures

We develop a general model to price VIX futures contracts. The model is adapted to test both the constant elasticity of variance (CEV) and the Cox–Ingersoll–Ross formulations, with and without jumps. Empirical tests on VIX futures prices provide out-of-sample estimates within 2% of the actual futures price for almost all futures maturities. We show that although jumps are present in the data, the models with jumps do not typically outperform the others; in particular, we demonstrate the important benefits of the CEV feature in pricing futures contracts. We conclude by examining errors in the model relative to the VIX characteristics