Asymmetric Payoff

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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.
The managerial flexibilities provide specific kinds of asymmetric payoffs analogous to those of the derivatives in a financial market.
Managerial flexibilities: asymmetric payoffs of MRG and RCP agreements
Followings show possible asymmetric payoffs of these two agreements and the combined form of the MRG and RCP agreements, "MRC".
As for the asymmetric payoffs for all node of the binomial tree, MRCu and MRCd, at [MATHEMATICAL EXPRESSION NOT REPRODUCIBLE IN ASCII]
At last, in a real world, since there are more various and complicated managerial flexibilities able to be formed as asymmetric payoffs, effort to identify, formulate, and evaluate these contingencies is more required.
This transformation is flexible for describing option-like and other asymmetric payoffs based on a symmetrically distributed underlying variable.
P]) describes the negatively asymmetric payoffs of a typical insurance contract--occasional large negative outcomes offset by far more frequent small positive outcomes.
It is often argued that much of the standard valuation models in finance are poorly suited for incorporating the pricing of asymmetric payoffs.
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.
These asymmetric payoff effects can be accentuated by shifts in parameters that do not alter the Nash predictions.
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