Pricing mining concessions based on combined multinomial pricing model (Q2398570): Difference between revisions
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Latest revision as of 07:14, 14 July 2024
scientific article
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English | Pricing mining concessions based on combined multinomial pricing model |
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Pricing mining concessions based on combined multinomial pricing model (English)
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16 August 2017
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Summary: A combined multinomial pricing model is proposed for pricing mining concession in which the annualized volatility of the price of mineral products follows a multinomial distribution. First, a combined multinomial pricing model is proposed which consists of binomial pricing models calculated according to different volatility values. Second, a method is provided to calculate the annualized volatility and the distribution. Third, the value of convenience yields is calculated based on the relationship between the futures price and the spot price. The notion of convenience yields is used to adjust our model as well. Based on an empirical study of a Chinese copper mine concession, we verify that our model is easy to use and better than the model with constant volatility when considering the changing annualized volatility of the price of the mineral product.
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mining concession
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mineral products
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annualized volatility
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copper mine concession
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multinomial pricing model
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