Geometric Brownian Motion Option Pricing Model for Professional Football Contracts

Sammanfattning: In recent years, the valuation of football players has gained significant attention, especially in the context of their transfer value in the market. Our investigation explores the application of a Geometric Brownian Motion option pricing model to estimate the transfer value of football players, considering the option-like characteristics of player contracts. This study is an adaptation to existing models within the football player valuation context, utilizing variables such as player performance, age, contract length, and market conditions. The pricing model is tested on a comprehensive dataset of football players who either transferred between Premier League clubs between 2017-2021 or played 50+ games in the league within the same period. The proposed model is compared to standard valuation methods, such as those based on market comparables or performance metrics. Our preliminary findings indicate that the Geometric Brownian Motion pricing model provides a robust framework for estimating football player transfer values. While our results do not confirm the model's definitive superiority, they highlight its potential in capturing the complex dynamics of football player valuation and provide a foundation for further exploration in this area.