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

Tyrone Lin (), Hui-Tzu Yen and Shu-Yen Hsu ()
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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

International Journal of Financial Engineering (IJFE), 2020, vol. 07, issue 02, 1-24

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.

Keywords: Binomial options pricing model; net present value; pricing; replicating portfolio approach; sustainability options (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1142/S2424786320500139

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