Abstract
The methodology is proposed to price the land in China based on real options model. The results from the option-based model in this research favor the application of the real option theory in land prices and have important role on investment decision. The results show the following conclusions: Firstly, the empirical results show the uncertainty with respect to built asset return has a substantial effect on increasing land prices, which is only explained by the option theory. Secondly, the asset price and the size of city have positive role on increasing the land price from. Thirdly, the risk-free interest rate affects option prices in two opposite direction. Lastly, information of the previous period has a very strong effect on the next period's land price.
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