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A Numerical Quadrature Approach To Option Valuation In Water Markets

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  • Villinski, Michele T.

Abstract

The standard Black-Scholes approach to option valuation becomes cumbersome and may fail to yield a solution when applied to non-standard options such as those emerging in water markets. An alternative tool, numerical quadrature, avoids some restrictive assumptions of the Black-Scholes framework and can more easily price options with complex structures.

Suggested Citation

  • Villinski, Michele T., 1999. "A Numerical Quadrature Approach To Option Valuation In Water Markets," 1999 Annual meeting, August 8-11, Nashville, TN 21708, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea99:21708
    DOI: 10.22004/ag.econ.21708
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    References listed on IDEAS

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    1. Robert C. Merton, 2005. "Theory of rational option pricing," World Scientific Book Chapters, in: Sudipto Bhattacharya & George M Constantinides (ed.), Theory Of Valuation, chapter 8, pages 229-288, World Scientific Publishing Co. Pte. Ltd..
    2. Merton, Robert C, 1998. "Applications of Option-Pricing Theory: Twenty-Five Years Later," American Economic Review, American Economic Association, vol. 88(3), pages 323-349, June.
    3. Cox, John C. & Ross, Stephen A. & Rubinstein, Mark, 1979. "Option pricing: A simplified approach," Journal of Financial Economics, Elsevier, vol. 7(3), pages 229-263, September.
    4. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
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