A pricing formula for delayed claims: appreciating the past to value the future
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Working paper
OA Location
Author(s)
Biffis, Enrico
Goldys, Ben
Prosdocimi, Cecilia
Zanella, Margherita
Type
Working Paper
Abstract
We consider the valuation of contingent claims with delayed dynamics in a Black and Scholes complete market model. We find a pricing formula that can be decomposed into terms reflecting the current market values of the past and the future, showing how the valuation of future cashflows cannot abstract away from the contribution of the past. As a practical application, we provide an explicit expression for the market value of human capital in a setting with wage rigidity.
Date Issued
2019-01-10
Citation
2019
Publisher
Elsevier BV
Copyright Statement
© 2019 The Author(s)
Identifier
https://ssrn.com/abstract=2607892
Publication Status
Published