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The modified binomial options pricing model and the revised replicating portfolio approach with the concept of sustainability options

Author

Listed:
  • Tyrone T. Lin

    (Department of International Business, National Dong Hwa University, Hualien 97401, Taiwan)

  • Hui-Tzu Yen

    (Department of International Business, National Dong Hwa University, Hualien 97401, Taiwan)

  • Shu-Yen Hsu

    (Department of International Business, National Dong Hwa University, Hualien 97401, Taiwan)

Abstract

This paper discusses whether the project investment can develop the decision-making for the concept of sustainability options. The conventional net present value (NPV) approach assesses whether the project investment should be implemented, and develops the evaluation criteria of implementing sustainability costs from the modified binomial options pricing model (BOPM) and the revised replicating portfolio approach. It treats options premium value and the replicating portfolio approach (RPA) value as the objective functions, and the options premium of the BOPM and the initial values of the RPA as the decision variables.

Suggested Citation

  • Tyrone T. Lin & Hui-Tzu Yen & Shu-Yen Hsu, 2020. "The modified binomial options pricing model and the revised replicating portfolio approach with the concept of sustainability options," International Journal of Financial Engineering (IJFE), World Scientific Publishing Co. Pte. Ltd., vol. 7(02), pages 1-24, June.
    • Handle: RePEc:wsi:ijfexx:v:07:y:2020:i:02:n:s2424786320500139
    DOI: 10.1142/S2424786320500139
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    Cited by:

    1. Kazi Wahadul Hasan & Maliha Binte Hanif, 2022. "A pricing model for real-estate business in Bangladesh incorporating the uncertainty in buyer’s readiness: considerations during COVID-19 pandemic," SN Business & Economics, Springer, vol. 2(10), pages 1-16, October.

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