The Valuation of Fisheries Rights: A Real Option Approach

34 Pages Posted: 27 Oct 2018

See all articles by Jose Pizarro

Jose Pizarro

University of British Columbia (UBC) - Sauder School of Business

Eduardo S. Schwartz

University of California, Los Angeles (UCLA) - Finance Area; Simon Fraser University (SFU); National Bureau of Economic Research (NBER)

Date Written: October 2, 2018

Abstract

This article develops and implements a Real Options approach to value renewable natural resources in the case of Marine Fisheries. The model includes two sources of uncertainty: the resource biomass and the price of fish, and it can be used by fisheries to optimally adapt their harvesting strategy to changing conditions in these stochastic variables. The model also features realistic operational cash flows and fisheries can shut down and reopen operations. Using publicly available data on the British Columbia halibut fishery, the required parameters are estimated and the model solved. The results indicate that the conservation of the biomass is both optimal from a financial and a social perspective. The approach could be extended to other fish species and natural resources if the appropriate data were available.

Keywords: Fisheries rights valuation, real options, sustainable harvesting

JEL Classification: Q20, Q22, G10, G13, G31

Suggested Citation

Pizarro, Jose and Schwartz, Eduardo S. and Schwartz, Eduardo S., The Valuation of Fisheries Rights: A Real Option Approach (October 2, 2018). Available at SSRN: https://ssrn.com/abstract=3259574 or http://dx.doi.org/10.2139/ssrn.3259574

Jose Pizarro (Contact Author)

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada

Eduardo S. Schwartz

University of California, Los Angeles (UCLA) - Finance Area ( email )

Los Angeles, CA 90095-1481
United States
310-825-1953 (Phone)
310-206-5455 (Fax)

Simon Fraser University (SFU) ( email )

8888 University Drive
Burnaby, British Columbia V5A 1S6
Canada

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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