Asymmetric Payoff

Asymmetric Payoff

A situation in which the settlement valuation on a security changes in a way other than a linear increase or decrease. Options are common instruments with asymmetric payoff. Forwards, on the other hand, generally have symmetric payoff.
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The combined effect of both of "uncertainty" and "managerial flexibility" may generate an asymmetric payoff condition called "contingent claim" where the project's revenue drastically shift and the fact one of the most popular capital budgeting theories, the NPV (Net Present Value) analysis, is limited to assess the value change caused by these asymmetric payoffs makes people seek alternations to resolve this issue.
This theory is based on the assumption that the stock price follows an uncertain diffusion process of a log-normal distribution called a 'Geometric Brownian Motio' proven to appropriately model the price of an asymmetric payoff of financial securities (Luenberger, 1998).
Firstly, the MRG agreement can be considered to be formulated as a repeatedly exercisable put option based on the asymmetric payoff condition in Equation (7).
It is worth reemphasizing that our definition of asymmetry does not correspond precisely with skewness, or any particular group of moments of the asymmetric payoff distribution.
Such a contract would, of course, have a highly asymmetric payoff distribution.
Investors in the firm's debt have an asymmetric payoff with respect to net assets.
Under this contracting explanation, conservative accounting is a means of addressing moral hazard caused by parties to the firm having asymmetric information, asymmetric payoffs, limited horizons, and limited liability.
These asymmetric payoff effects can be accentuated by shifts in parameters that do not alter the Nash predictions.
With regard to the contracting explanation, accounting conservatism reduces moral hazard problems caused by contracting parties with asymmetric information, asymmetric payoffs, limited horizons, and limited liability.
The major novelty of our article is to study by means of a laboratory experiment the impact of cheap talk communication and the emergence of turn taking in a symmetric two-player two-stage coordination game with asymmetric payoffs.
To reproduce this type of strategic situation, in the first stage of our finitely repeated two-stage coordination game with asymmetric payoffs, two players have to choose independently and simultaneously between two options, knowing that their decisions will determine the options that will be available in the second stage and thereby the attainable payoffs.
futures, forwards, swaps), where gains or losses accrue in magnitudes consistent with price changes in either direction, or those with asymmetric payoffs (e.
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