Authors: Rania El Modni; Mounime Elkabbouri; Tariq Morchid
Addresses: National School of Business and Management, University Hassan I, Settat, Morocco ' National School of Business and Management, University Hassan I, Settat, Morocco ' Dubai International Academic City, P.O. Box 503000, Dubai, UAE
Abstract: This paper aims to offer a practical example of applying the real option pricing method in the football sector. This paper makes two significant contributions in this context. Firstly, it provides a formal theoretical basis for the validity of the Black-Scholes option pricing model in the valuation of buy-back options included in player transfer agreements. Secondly, it presents the first application of the Black-Scholes model using a real player contract situation as its testbed. Our application focuses on comparing the buy-back option price obtained from the Black-Scholes model with the price estimated by the Monte Carlo simulation. Results show that the Black-Scholes model, generally used for pricing financial options, can also be applied to estimating buy-back options, but with some limitations.
Keywords: real options; Black-Scholes model; Monte Carlo simulations; buy-back option; transfer agreement; football.
International Journal of Sport Management and Marketing, 2021 Vol.21 No.5/6, pp.410 - 425
Received: 04 Jun 2020
Accepted: 03 Jun 2021
Published online: 03 Jan 2022 *