A Derivative of Digital Objects and Estimation of Default Risks in Electronic Commerce

Abstract. In electronic commerce, traded digital objects are likely associated with several numerical values as well as their prices. These values may change unpredictably over time and bring risks both to the providers and to the consumers of the application. One possible strategy for hedging the risks is to introduce derivatives regarding the uncertain values. This paper shows a theoretical pricing equation of the derivatives when the underlying digital objects have systematic default or revocation risks. We can make use of this pricing to estimate the risks.

• Type: Conference
• Year: 2001
• Where: ICICS
• Authors: Kanta Matsuura
• Keywords: Communications, Digital Objects, ICICS 2001, Numerical Values, Risks