An option pricing approach to the valuation of rubber and palm oil producers

Advances in the option pricing literature have important implications for more basic valuation problems. An option pricing approach to the valuation of risky firms can accommodate uncertainty about product market conditions and managerial decisions more readily than a discounted cash flow approach. This paper adapts the stock option pricing approach of Black and Scholes (1973) to the valuation of shares of rubber and palm oil producers. A case study assesses the power of an option-based model to predict market share prices of a rubber and palm oil producer listed on the Stock Exchange of Singapore.