Option on Human Performance ( A Case Study on Cricket Players)

Abstract

Performance of the human play a vital role in every field of life, whether that is politics, wars, films, or sports etc. The purpose of this research paper is to test the hypothesis, whether the performance of some elite/professional individual can be treated as real option. In this paper we propose a new measure of valuing the performance of cricket players. The pricing of Cricket players is based on a performance index such as SS Index. The value of a player varies from club to club, depending on the performance points generated through SS index. We choose 5 players from different teams and then calculate their values by using the points from SS index. Then we use binomial option pricing model to calculate the actual value of the player. Our results show that the value of the player changes as the performance change.

Keywords: Real options, Binomial Pricing model, SS index, Cricket, IPL