A Call on Art Investments

Kräussl, Roman; Wiehenkamp, Christian

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A Call on Art Investments

Review of Derivatives Research, Vol. 15, No. 1, 2012.

30 Pages Posted: 26 Feb 2020 Last revised: 20 Mar 2012

See all articles by Roman Kräussl

Roman Kräussl

Bayes Business School (formerly Cass); Hoover Institution, Stanford University; Centre for Economic Policy Research (CEPR)

Christian Wiehenkamp

affiliation not provided to SSRN

Date Written: January 15, 2011

Abstract

The art market has seen a sustained growth over the last years, but participation has been reserved for just a few investors. The paper proposes to overcome this problem by introducing a call option on an art index which is derived from one of the most comprehensive data sets of art market transactions. The option allows investors to optimize their exposure to art. For pricing purposes, nontradability of the art index is acknowledged, and a fundamental PDE for the option value and its closed form solution are derived, if one assumes the underlying to be correlated with an existing asset. A lower bound for the option value is also given when no such correlated asset exists.

Keywords: Art Market, Art Index, Alternative Investments, Option Pricing

JEL Classification: G11, G13, Z11

Suggested Citation: Suggested Citation

Kraeussl, Roman and Wiehenkamp, Christian, A Call on Art Investments (January 15, 2011). Review of Derivatives Research, Vol. 15, No. 1, 2012., Available at SSRN: https://ssrn.com/abstract=1301073