Options Embedded in Physical Money

Posted: 9 Dec 2008 Last revised: 24 Mar 2009

See all articles by Espen Gaarder Haug

Espen Gaarder Haug

Norwegian University of Life Sciences (NMBU)

John Stevenson

affiliation not provided to SSRN

Date Written: December 9, 2008

Abstract

Embedded options in the worlds physical monies, both coin and paper, are introduced. The option value for base metal coins is presented. The various strategies for redemption by the owner and the prevention of redemption by the issuer (central banks) are discussed. The market values of gold coins are discussed in light of the embedded option valuation. In conclusion, the rational behavior of both individuals and central banks in light of these valuations is described.

Keywords: Coins, bills, paper money, gold and silver coins, central

JEL Classification: E41, E52, E58, G12, G13

Suggested Citation

Haug, Espen Gaarder and Stevenson, John, Options Embedded in Physical Money (December 9, 2008). Available at SSRN: https://ssrn.com/abstract=1313665

Espen Gaarder Haug (Contact Author)

Norwegian University of Life Sciences (NMBU) ( email )

As
As
Oslo, Norway, 1432
Norway

John Stevenson

affiliation not provided to SSRN

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