Real option valuation methods: application in the football sector

This paper aims to offer a practical example of applying the real option pricing method in the football sector. This paper makes two significant contributions in this context. Firstly, it provides a formal theoretical basis for the validity of the Black-Scholes option pricing model in the valuation of buy-back options included in player transfer agreements. Secondly, it presents the first application of the Black-Scholes model using a real player contract situation as its testbed. Our application focuses on comparing the buy-back option price obtained from the Black-Scholes model with the price estimated by the Monte Carlo simulation. Results show that the Black-Scholes model, generally used for pricing financial options, can also be applied to estimating buy-back options, but with some limitations.