Pricing war within a real option framework

Vincent Medina and Cyr-Denis Nidier

Defence and Peace Economics, 2003, vol. 14, issue 6, 425-435

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.

Keywords: War; Options; Financial Calculus (search for similar items in EconPapers)
Date: 2003
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DOI: 10.1080/1024269032000085198

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