Forest Investment Account

Abstract of FII Project R2003-242

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Valuing forest investment opportunities as real options

Author(s): Herath, Hemantha (University of Northern British Columbia)
Subject: Silviculture/Forest Management Systems
Series: Forest Investment Account (FIA) - Forest Science Program


A primary challenge in the forest sector is determining the value of forest investment opportunities. The forest sector is characterized by long investment horizons, risks due to uncertainty in lumber prices, high and changing cost structures and uncertain forest inventories. Furthermore, the economic choices that can be made in managing forest resources are also constrained by environmental policy and governmental regulations, which add further complexity. Are there better risk management tools that can aid in determining the value of forest assets? What is the market value of forest concessions, which can be used as a base for bidding for forest concession rights? The proposed research program will provide a methodological approach to evaluating forest harvesting and replanting investment opportunities that utilizes emerging valuation techniques in economic analysis. It will also inform forest industry practitioners and provide training in risk management techniques that will maintain and enhance timber volume and value.

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Updated September 08, 2005 

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