Product Details

by Kishore Kagolanu
Spring 2000 Issue

Leasing activity involves the exchange of options on a variety of underlying assets. In this paper we identify the financial options that leasing participants hold. Next, we evaluate the economic aspects of the leasing value chain. The goal is to provide a framework for lessors to identify the options they hold, determine if they are compensated for holding those positions, and evaluate the forces shaping the sector. Eventually, lessors can choose which options they are willing to hold, and thereby be compensated for holding them while managing the risks more efficiently. An examination of the structure of the firm is presented via an options framework. These ideas form the theme and basis for the application of options technology to the leasing industry.