How the Real Option Reduces Risks in Producing Film Sequels
DOI:
https://doi.org/10.54691/bcpbm.v20i.1091Keywords:
Arbitrage; Risk management; Binomial Trees; Black Scholes Model; Film IndustryAbstract
The film industry history can be traced back to the late eighteenth century when people began to realize the necessity of entertainment. After years of development, more and more people start to pay for watching films, which generates a tempting revenue for the film industry and further helps the industry attract more investment. To handle the risk of investment, signing an option contract and using real options can help investors make decisions more rationally. In this paper, the author will focus on using option theories to reduce risks by purchasing sequel rights. It provides a sample of reducing risks for investment in the film industry and arbitrage from undervalued sequel rights, which can be imitated in similar conditions.
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