Modelling options on football players using individual rankings and club market value. Evidence from Italy

The paper develops a theoretical model for the valuation of options on players using individual player performance and club market value as value drivers. The paper also provides a test of the model by using data on individual rankings (from Squawka) to determine the value of players. For the team, the market value of listed clubs net of fixed assets is used. To account for the influence of player age on the ranking, the value is modelled using a mean reversion process. The model provides estimates that are consistent with the actual values on the transfer market in the case of three Italian football players. The empirical analysis is complemented by a predictive approach to check the robustness, generalisation and consistency of the proposed model.