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Pricing war within a real option framework

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  • Vincent Medina
  • Cyr-Denis Nidier

Abstract

The aim of this paper is to provide insights on war spending using simple tools of financial calculus rather than developing a general theory. Combining Grossman and Han's theory of war finance with the empirical literature that displays a straightforward relationship between the real value of money and wartime military events, we advocate the use of the real option approach of war spending. Some calculations and an empirical example illustrate this approach.

Suggested Citation

  • Vincent Medina & Cyr-Denis Nidier, 2003. "Pricing war within a real option framework," Defence and Peace Economics, Taylor & Francis Journals, vol. 14(6), pages 425-435.
    • Handle: RePEc:taf:defpea:v:14:y:2003:i:6:p:425-435
    DOI: 10.1080/1024269032000085198
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    References listed on IDEAS

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    Keywords

    War; Options; Financial Calculus;
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