The three-factor model of evaluating mining rights of coal resources based on options

摘要

Since mining rights of coal resources(for short MRCR) could be regarded as a multi-stage compound real option,the evaluation for MRCR can be better solved using op- tion theory than the NPV.In the former research,we developed a two-factor model of evaluating MRCR when the coal spot price and convenience yield are stochastic based on option theory.On the basis of this two-factor model,we set up a three-factor model of evaluating MRCR when the interest rate followed a stochastic process.Through a real example application,we found the model can get higher values than the two-factor model and the NPV.This is because considering the volatility of interest rate can improve the executive opportunity of MRCR.