@article{Fleming:234295,
      recid = {234295},
      author = {Fleming, Euan and Villano, Renato and Williamson, Brendon},
      title = {Structuring Exotic Options Contracts on Water to Improve  the Efficiency of Resource Allocation in the Australian  Water Market},
      address = {2013},
      number = {398-2016-24460},
      series = {Paper},
      pages = {24},
      year = {2013},
      abstract = {The potential economic benefits that options contracts  bring to the Murray Valley water market in Australia are  assessed. Exotic call option prices are estimated using  Black-Scholes and skewness-and-kurtosis-amended  Black-Scholes option closed-form pricing methods that are  based on mean weekly water prices between 2004 and 2008.  While options would result in significant economic benefits  through more efficient trade of water on the open market  for lower-value crops, there were mixed results from  attempts to price them. Results show that use of the  standard Black-Scholes formula is likely to undervalue  option prices considerably at all but improbably low levels  of volatility in water prices. Water option prices are high  relative to the net present value of option benefits for  recent levels of volatility, which is likely to discourage  the development of a water options market. Alternatives to  reduce the option prices are discussed. Other potential  constraints to the implementation of a water options  trading system are outlined.},
      url = {http://ageconsearch.umn.edu/record/234295},
      doi = {https://doi.org/10.22004/ag.econ.234295},
}