The modified binomial options pricing model and the revised replicating portfolio approach with the concept of sustainability options

Abstract

This paper discusses whether the project investment can develop the decision-making for the concept of sustainability options. The conventional net present value (NPV) approach assesses whether the project investment should be implemented, and develops the evaluation criteria of implementing sustainability costs from the modified binomial options pricing model (BOPM) and the revised replicating portfolio approach. It treats options premium value and the replicating portfolio approach (RPA) value as the objective functions, and the options premium of the BOPM and the initial values of the RPA as the decision variables.

A pricing model for real-estate business in Bangladesh incorporating the uncertainty in buyer’s readiness: considerations during COVID-19 pandemic

“…Different models have been developed considering binomial pricing strategies. A few instances of such studies include a flexible binomial option pricing model (Lin et al 2020 ), and a case for using real options’ pricing analysis to evaluate information technology project investments (Cruz Rambaud and Sánchez Pérez 2016 ). However, it has been analyzed and found that binomial pricing models are suitable for developing a simple pricing strategy.…”