Pricing Real Options Contracts in Capacity Exchanges


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Google Tech Talks October 20, 2006 ABSTRACT First talk (joint work with Dr. Shijie Deng of GT) is a theory piece where we propose to create industrial exchanges for capacity trading via options contracts. In a continuous-time setting, we study the pricing of tradable capacity options contracts in business-to-business (B2B) exchanges in a variety of industries such as contract manufacturing, semiconductor (e.g. memory chips), oil and gas, electric power or commodity chemicals. The contract takes the form of European call option that specifies a premium price and a strike price. We show that the real options pricing formula is a modified Black-Merton-Scholes pricing formula and is equivalent to the...

Category: Howto
Uploaded: July 23rd, 2007 @ 10:00 pm
Author: Google

Length: 37:37
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Views: 2,966

Tags: contracts google howto options pricing real

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