Hold Option

The Hold Option is a bandwidth reservation contract which guarantees the buyer that a specified amount of bandwidth will available at a specified time, for a specified duration, at a specified unit price or less. To accept a Hold Option offer, the buyer must pay a non-refundable reservation fee, which is computed as an option premium. The reservation is thus a derivative market instrument, analogous to a call option in equity markets. However, bandwidth is fundamentally different from, say, stocks, and as such requires pricing models that are different from those used in traditional commodities. Invisible Hand Networks' patent-pending Hold Option is an efficient derivative pricing mechanism which generalises the concept of Black-Scholes pricing to real-time shareable resources.

References

1. The Hold Option theory is derived in: Spot and Derivative Markets in Admission Control 16th ITC, Edinburgh, June 1999.