The Effect Of Waiting Time On Contract Pricing Of Asset Leasing

In asset lease market, lessors receive the value of the lease payments plus the residual value of asset from which lessee receiving the benefits of use. Based on the characteristic of capital-intensive engineering equipments this dissertation researches the effect of time factor in asset lease pricing process through appropriate pricing model.The dissertation adopts market equilibrium model originating from real option thought, for the characteristic of involved asset. Because capital-intensive engineering equipments is restricted, illiquid for limited lessee, traditional arbitrage theory is not suitable for this pricing behavior in market as the investment on asset is nearly irreversible.From the adopted primary model dealing with lease as portfolio embedded an option, a pricing model involved contract flexibility has been deduced, which here means interval between contracts' signing and exercise. An explanation on the effects of contract flexibility for lease rates under different initial rent is made eventually by comparisons with simple data input.As term waiting time is the meaning of idle between consecutive leasing contracts that is incurred by their arriving velocity, the dissertation propose the resolve that lessee compensate lessor for the above. Building a simple motion model of contract, a rent premium formula describing common extension option for lease contract is achieved. From this formula, we see premium is related with the term, velocity and flexibility of contract, which is in accordance with the presupposition. Then a comparison about effects of possibility of option exercise for asset using utilization also shows some useful results. At last a payment strategy for contract with extension option has been provided tentatively.The study about waiting time necessary for the leasing of capital-intensive engineering equipments will provide effective theory basis in leasing asset pricing, and help companies competing in market set appropriate operative strategy, so as to facilitate the whole lease market.