Player valuation, with some help from options pricing theory

Radu Tunaru, Ephrahim Clark, and Howard Viney, "An options pricing framework for valuation of football players", Review of Financial Economics, 14: 281-295, 2005.

It is important for football club management to know how much their players are worth on the open market.  This publication is the first to use concepts from options pricing to develop a framework for determining the value of football players from the perspective of the club that holds his contract or the club interested in purchasing his services.  This valuation system opens the door to a variety of options for managing or trading the contracts of players.

This is yet another paper from the Cass Business School at City University London, where Stefan Szymanski and his colleagues are developing some impressive expertise in sports analytics.  There's a lot to discuss in this paper, but I found this video by Dr. Tunaru in which he presents his work at a New England Symposium on Statistics in Sports at Harvard last September.  He explains it better than I could and gives some interesting implications of the modeling work.  His concluding point is a big one and echoes one made by Billy Beane: every club should know exactly what their players are worth.