• We are pleased to announce that the winner of our Feedback Prize Draw for the Winter 2024-25 session and winning £150 of gift vouchers is Zhao Liang Tay. Congratulations to Zhao Liang. If you fancy winning £150 worth of gift vouchers (from a major UK store) for the Summer 2025 exam sitting for just a few minutes of your time throughout the session, please see our website at https://www.acted.co.uk/further-info.html?pat=feedback#feedback-prize for more information on how you can make sure your name is included in the draw at the end of the session.
  • Please be advised that the SP1, SP5 and SP7 X1 deadline is the 14th July and not the 17th June as first stated. Please accept out apologies for any confusion caused.

Option pricing for Non-Public companies

H

hi5

Member
Hi everyone,
Can anyone tell about a good option pricing model for non-public companies?

Links would be particularly appreciated.

Thanks
All the best for the results.
 
I don't think there is a definitive answer to this question, there are many ways of doing it.

I would probably approach it using a real world measure approach. The reason for this is that for a non-public company, the risk-neutral pricing method doesnt really hold - you cannot setup a replicating portfolio so the opportunity for arbitraging mispriced options is gone.

So answer is to do some fundamental analysis, project growth in shareholder's equity and do a good old fashioned actuarial pricing exercise - perhaps based on mean + function of s.d. of payoff.

Note that as the shares are not traded, it would be hard to analyze historical vol etc. You would need to look at accounting history I guess.
 
You must log in or register to reply here.
Back
Top