Valuation of asset leasing contracts

McConnell, John J.; Schallheim, James S.

doi:10.1016/0304-405x(83)90037-5

Cited by 142 publications

(82 citation statements)

References 18 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…As noted in [31] some of the provisions that can be written into a lease are: (1) leases which grant the lessee the right to purchase the leases asset at a fixed price at the maturity date of the contract;…”

Section: Discussionmentioning

confidence: 99%

“…We are interested in determining how does one make the lease-or-buy decision in an environment were the lessee is uncertain for how long he will actually need the underlying asset. One paper that does account for uncertainty with regard to the length of time that the asset is required for is that by McConnell and Schallheim [31]. They use an option pricing framework to value operating leases.…”

Section: The Leasing Problemmentioning

confidence: 99%

See 1 more Smart Citation

Competitive Optimal On-Line Leasing

1999

View full text Add to dashboard Cite

Abstract. Consider an on-line player who needs some equipment (e.g., a computer) for an initially unknown number of periods. At the start of each period it is determined whether the player will need the equipment during the current period and the player has two options: to pay a leasing fee c and rent the equipment for the period, or to buy it for a larger amount P. The total cost incurred by the player is the sum of all leasing fees and perhaps one purchase.The above problem, called the leasing problem (in computer science folklore it is known as the ski-rental problem), has received considerable attention in the economic literature. Using the competitive ratio as a performance measure this paper is concerned with determining the optimal competitive on-line policy for the leasing problem.For the simplest version of the leasing problem (as described above) it is known and readily derived that the optimal deterministic competitive performance is achieved by leasing for the first k − 1 times and then buying, where k = P/c. This strategy pays at most 2 − 1/k times the optimal off-line cost.When considering alternative financial transactions one must consider their net present value. Thus, accounting for the interest rate is an essential feature of any reasonable financial model. In this paper we determine both deterministic and randomized optimal on-line leasing strategies while accounting for the interest rate factor.It is shown here, for the leasing problem, that the interest rate factor reduces the uncertainty involved. We find that the optimal deterministic competitive ratio is 1 decreasing function of the interest i (for all reasonable values of i).For some applications, realistic values of interest rates result in relatively low competitive ratios. By using randomization the on-line player can further boost up the performance. In particular, against an oblivious adversary the on-line player can attain a strictly smaller competitive ratio of 2Here again, this competitive ratio strictly decreases with i.We also study the leasing problem against a distributional adversary called "Nature." This adversary chooses the probability distribution of the number of leasing periods and announces this distribution before the on-line player chooses a strategy. Although at the outset this adversary appears to be weaker than the oblivious adversary, it is shown that the optimal competitive ratio against Nature equals the optimal ratio against the oblivious adversary.

show abstract

Section: Discussionmentioning

confidence: 99%

Section: The Leasing Problemmentioning

confidence: 99%

Competitive Optimal On-Line Leasing

1999

View full text Add to dashboard Cite

show abstract

“…In a numerical example under some reasonable assumptions, McConnell and Schallheim (1983) show an upward-sloping term structure of cancellable lease rates in their Table 1. Up to now, we have only considered the tenant cancellation option.…”

Section: ̅ )mentioning

confidence: 99%

“…Coupled with physical heterogeneity of the underlying property, the contractual variations give rise to wide variations in equilibrium lease rates. Previous studies have proposed general theoretical models of lease rates that can accommodate different contractual characteristics (for example, see McConnell andSchallheim, 1983 andGrenadier, 1995). More recent studies enrich the model by introducing additional factors such as interest rate risk, tenant's credit risk, and imperfect competition (Clapham and Gunnelin, 2003, Ambrose and Yildirim, 2008, Agarwal et al, 2011, and Grenadier, 2005.…”

mentioning

confidence: 99%

Downward-Sloping Term Structure of Lease Rates: A Puzzle

2012

View full text Add to dashboard Cite

“…According to the standard terms of operating lease, it is a service where the financial institutions act as a leaser and the customer, leasee receives the right to use the leased asset over a specified period of time. The first rental payment would be made when the lease is initiated and the subsequent payments will be made periodically at agreed dates in the future (McConnell and Schallheim, 1983). The leaser would profit from the interests payments included in the periodic instalments made by the leasee.…”

Section: Introductionmentioning

confidence: 99%

A SERVQUAL approach to identifying the influences of service quality on leasing market segment in the German financial sector

Ramanathan

Win

Wien³

2018

BIJ

View full text Add to dashboard Cite

Purpose -The purpose of this paper is to determine the nature of the relationship between service quality and desired customer behaviours in the leasing market using an appropriate service quality measurement model. We take a step further by recognising the possible differences in influence of service quality in private and corporate customers, and those business dealings with low, medium and high lease values. Design/methodology/approach -We use deduction method to test the SERVQUAL in the German leasing market and the relationship between customer satisfaction and desired behavioural outcomes. The developed questionnaire is based on the 22 item scale of the SERVQUAL approach. Samples are selected based on convenience sampling. Findings -We found differences in the levels of inflence by SERVQUAL dimensions on corporate and private customers as well as among those customers with different leasing contract values. From the regression analyses, it is clear that 'assurance' from the leasing company is the most common SERVQUAL dimension that has significant impact on overall service quality perceptions and obtaining customers satisfaction and loyalty (behavioural outcomes). Originality/Value -We recognised that all financial services are not created equally to meet customer demands. Hence, the customer expectations of service quality from these services will be different. We contributed to the marketing literature by studying customer perceptions of service quality by specifying financing aspects of financial services, i.e. leasing. We further contributed to the literature of SERVQUAL model in financial services by dividing customers into two different types of customers and those with diverse leasing contract values. We found that priorities given on service quality dimensions by them are different. These concepts were never considered in the literature. This also implies that future studies on financial services marketing need to recognise such differences in the research.

show abstract

Valuation of asset leasing contracts

Cited by 142 publications

References 18 publications

Competitive Optimal On-Line Leasing

Competitive Optimal On-Line Leasing

Downward-Sloping Term Structure of Lease Rates: A Puzzle

A SERVQUAL approach to identifying the influences of service quality on leasing market segment in the German financial sector

Contact Info

Product

Resources

About