template for pricing the right of first refusal shelley and chris ,
i have set up a template for pricing rofrs . the rofr is priced as a series
forward start options .
a forward start option gives the holder the right to exercise the option but
the strike price
is set at the money in future before the option expiration . the feature
mimics the " matching the best bid "
in the rofr . the underlying for the option is the " best bid " , which should
be closely related to the
price differential between the two hubs that the pipeline connects . therefore
the rofr is case dependent ,
as vince pointed out . the volatility can be estimated from the " best bid "
price history .
with these inputs we can estimate the value of rofr . if you have any
questions concerning the model
please feel free to call me or vince .
zimin lu
template for pricing the right of first refusal
shelley and chris ,
i have set up a template for pricing rofrs . the rofr is priced as a series
forward start options .
a forward start option gives the holder the right to exercise the option but
the strike price
is set at the money in future before the option expiration . the feature
mimics the " matching the best bid "
in the rofr . the underlying for the option is the " best bid " , which should
be closely related to the
price differential between the two hubs that the pipeline connects . therefore
the rofr is case dependent ,
as vince pointed out . the volatility can be estimated from the " best bid "
price history .
with these inputs we can estimate the value of rofr . if you have any
questions concerning the model
please feel free to call me or vince .
zimin lu