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An auction clearing question

An auction clearing question# Economics - 经济

c*e2008-04-16 07:04

1 楼

Say you hold an option on the difference betwen A and B, i.e. max(0, A-B).
You have a chance to participate two rounds of drawings of A and B and offer
to settle your option at a certain price. For example, if you are offering
to settle the option at $2, and it turns out max(0, A-B) is $10, then you
get $10. If not, you can carry the option to the next round.
A tricky question, if you are offering your option at $0, and it turns out A
is less than B, (e.g. A=4, B=5 which makes max(0, A-B)=0), wi

D*y2008-04-16 07:04

2 楼

I guess your game is like this (like discrete American option game)
One have to pay a premium for the option at the beginning of the game.
max(0,A-B) is the value of the option at each round.
There are multiple rounds, one can liquidate the option at one round; if not
, he holds the option to next round.
So option 0 means you do not pay anything but have a chance to earn. I think
in your case, it should not be cleared, and he has the chance to earn with
no cost.

offer
offering
A
offer

【在 c******e 的大作中提到】

: Say you hold an option on the difference betwen A and B, i.e. max(0, A-B).
: You have a chance to participate two rounds of drawings of A and B and offer
: to settle your option at a certain price. For example, if you are offering
: to settle the option at $2, and it turns out max(0, A-B) is $10, then you
: get $10. If not, you can carry the option to the next round.
: A tricky question, if you are offering your option at $0, and it turns out A
: is less than B, (e.g. A=4, B=5 which makes max(0, A-B)=0), wi