-Application of Real Options in Assessing the Financial Valuation of Agricultural Investments Considering Temperature and Other Climate Variables

This thesis develops a novel framework for evaluating agricultural investments under varying environmental and economic conditions using a real options analysis (ROA) model. The model is applied to three scenarios: open-air farm considering predicted future temperatures, open air farm considering temperature increases at a steady (static) rate and, thirdly, vertical farming. The analysis provides insights into the financial performance, risk profiles, and strategic considerations of each method. The findings suggest that while vertical farming offers higher yields, its viability is highly sensitive to energy costs, while open-air farming is more vulnerable to climate variability. The research contributes to a better understanding of the financial and environmental trade-offs between traditional and innovative farming practices, along with the limitations of static valuation methods in the context of global warming.