A Call on Art Investments

30 Pages Posted: 17 Nov 2008 Last revised: 20 Mar 2012

Roman Kräussl

Luxembourg School of Finance; Emory University - Goizueta Business School

Christian Wiehenkamp

RiskLab GmbH

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

Kräussl, 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

Roman Kraeussl (Contact Author)

Luxembourg School of Finance ( email )

4, rue Albert Borschette
Luxembourg, 1246
Luxembourg
+3524666445442 (Phone)

HOME PAGE: http://www.art-finance.com

Emory University - Goizueta Business School ( email )

1300 Clifton Road
Atlanta, GA 30322-2722
United States
+14042812253 (Phone)
+14047275238 (Fax)

HOME PAGE: http://www.art-finance.com

Christian Wiehenkamp

RiskLab GmbH

Seidlstr. 24-24a
Munich, 80335
Germany

HOME PAGE: http://www.risklab.com

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