Analoging the digital: Designing better binary option contracts

2021 ◽  
Author(s):  
Yisong S. Tian
Keyword(s):  
Option Contracts

Option Contracts and Renegotiation in Complex Environments

2001 ◽  
Author(s):  
Eric Bennett Rasmusen ◽  
Thomas P. Lyon
Keyword(s):  
Complex Environments ◽  
Option Contracts

High-Water Marks Contracts Versus Recurring Option Contracts

2015 ◽  
Author(s):  
C. Wei Li
Keyword(s):  
High Water ◽  
Option Contracts

Corporate Governance and the Design of Stock Option Contracts

2011 ◽  
Author(s):  
Zacharias Sautner ◽  
Martin Weber
Keyword(s):  
Corporate Governance ◽  
Stock Option ◽  
Option Contracts

Construction material supply risk management using Asian option contracts: the case of a pipeline project

2020 ◽  
Vol 27 (10) ◽  
pp. 3395-3414
Author(s):  
Mohammad Vahdatmanesh ◽  
Afshin Firouzi
Keyword(s):  
Risk Management ◽  
Scenario Analysis ◽  
Price Risk ◽  
Asian Option ◽  
Steel Pipeline ◽  
Content Type ◽  
Price Fluctuations ◽  
Option Contracts ◽  
Pipeline Project ◽  
Total Price

PurposeSteel price uncertainty exposes pipeline projects that are inherently capital intensive to the risk of cost overruns. The current study proposes a hedging methodology for tackling steel pipeline price risk by deploying Asian option contracts that address the shortcomings of current risk mitigation strategies.Design/methodology/approachA stepwise methodology is introduced, which uses a closed-form formula as an Asian option valuation method for calculating this total expenditure. The scenario analysis of three price trends examines whether or not the approach is beneficial to users. The sensitivity analysis then has been conducted using the financial option Greeks to assess the effects of changes in volatility in the total price of the option contracts. The total price of the Asian options was then compared with those of the European and American options.FindingsThe results demonstrate that the Asian option expenditure was about 1.87% of the total cost of the case study project. The scenario analysis revealed that, except for when the price followed a continuous downward pattern, the use of this type of financial instrument is a practical approach for steel pipeline price risk management.Practical implicationsThis approach is founded on a well-established financial options theory and elucidates how pipeline project participants can deploy Asian option contracts to safeguard against steel price fluctuations in practice.Originality/valueAlthough the literature exists about the theory and application of financial derivative instruments for risk management in other sectors, their application to the construction industry is infrequent. In the proposed methodology, all participants involved in fixed price pipeline projects readily surmount the risk of exposure to material price fluctuations.

Option contracts

2013 ◽  
Vol 48 (10) ◽  
pp. 475-494 ◽  
Author(s):  
Christos Dimoulas ◽  
Robert Bruce Findler ◽  
Matthias Felleisen
Keyword(s):  
Option Contracts

Channel coordination with a loss-averse retailer and option contracts

2014 ◽  
Vol 150 ◽  
pp. 52-57 ◽  
Author(s):  
Xu Chen ◽  
Gang Hao ◽  
Ling Li
Keyword(s):  
Channel Coordination ◽  
Option Contracts

Supplier selection and order allocation problem through option contracts under supply disruption risks

2020 ◽  
Vol 11 (4) ◽  
pp. 308
Author(s):  
Masoud Rabbani ◽  
Ali Reza Nazari Estahbanati ◽  
Soroush Aghamohamadi Bosjin
Keyword(s):  
Supplier Selection ◽  
Allocation Problem ◽  
Order Allocation ◽  
Supply Disruption ◽  
Option Contracts ◽  
Disruption Risks

PRICE RISK HEDGING IN INTERNATIONAL TRADE OF AGRICUL-TURE AND FOOD COMMODITIES USING OPTIONS

2020 ◽  
Author(s):  
Nikolai Nalbandian ◽  
Keyword(s):  
International Trade ◽  
Multinational Enterprises ◽  
Practical Importance ◽  
Sustainable Growth ◽  
Price Risk ◽  
Continuous Increase ◽  
Economic Agents ◽  
Risk Hedging ◽  
Option Contracts ◽  
Food Commodities

The focus of this article is an employment of option contracts by economic agents when hedging a price risk in international trade of agriculture and food commodities. Despite a serious downturn in the world economy accompanied with major logistics and global value chains disruptions caused by Coronavirus disease in 2020, international agri-food trade demonstrates a sustainable growth supported by a constantly waxing demand due to continuous increase in population and improvement in living standards as well as a higher supply due to modern technological progress. It therefore implies that a comprehensive price risk management system should be introduced to avoid or minimize market participants’ exposure to potentially adverse future events. The article is devoted to the study of the key advantages of using options as an integrated element within such a system. Comparative analysis of future and option contracts is conducted to better understand their respective application depending on a risk profile of an event. The economic nature of options is presented from the perspective of a concept of price insurance that provides for an existence of a certain risk premium determined by market forces which is paid by economic agents to obtain such a price guarantee. Fundamental characteristics of an option contract as a financial derivative, its types and features, reason of usage according to the goals that economic agents, including e.g., powerful multinational enterprises (MNE), try to achieve depending on their specific market position are described. The article explains situations of economic agents, both producers and processors of agricultural commodities on the one hand (acting as hedgers) and speculators one the other hand (acting as such), being naturally long or naturally short as well as respective tactics based on options they adhere to with the aim of protecting their positions against unfavorable moves in market prices. Thus, the fact it refers to real scenarios of using options as price risk hedging tools which international traders can utilize when moving agricultural and food commodities globally, reinforces opinion that this article is of a significant practical importance.

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