Valuing Forestry Agronomic Potential under Seasonal Mean-Reverting Prices

In the valuation of forest resources, alternative use land is one central themes. most cases it made without taking into account uncertainty and possible flexibility use. Within these alternatives, strategy shifting to a more profitable sustainable crop well-studied topic in research. Although transformation opportunity could add great value project, this obviated by traditional discounted cashflow criteria (NPV). The application real options theory (ROT) makes assess based on that entails. However, hypotheses are about future evolution underlying asset, case new crop, may condition precision result. Usually some researchers model conversions under hypothesis geometric Brownian motion (GBM), not plausible when has strong seasonal component. work, an adapted framework proposed evaluate another both high agronomic potential component, context which classic applicable. As work theoretical model, after methodological motivation, strawberry chosen as due its Using private data for we through Ornstein–Uhlenbeck process, with mean-reversion (MR) then Longstaff Schwartz’s algorithm calculate option value. results show considering leads increase return than 4%. Furthermore, robustness analysis evidence shows very sensitive reinforcing previous suggests MR process offers accurate appropriate over GBM arena valuation. Specifically, result valuing between 1.5 1.7 times NPV, approximately 13% annual return. If had been used, would have 72% return, unrealistic context, non-consideration mean-reverting prices process.