A Call on Art Investments
Luxembourg School of Finance; Emory University - Goizueta Business School
January 15, 2011
Review of Derivatives Research, Vol. 15, No. 1, 2012.
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.
Number of Pages in PDF File: 30
Keywords: Art Market, Art Index, Alternative Investments, Option Pricing
JEL Classification: G11, G13, Z11
Date posted: November 17, 2008 ; Last revised: March 20, 2012