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Discrete Dynamics in Nature and Society
Volume 2017, Article ID 2196702, 9 pages
Research Article

Pricing Mining Concessions Based on Combined Multinomial Pricing Model

School of Humanities and Economic Management, China University of Geosciences, Beijing 100083, China

Correspondence should be addressed to Chang Xiao; nc.ude.bguc@1200517003

Received 16 October 2016; Revised 5 December 2016; Accepted 21 December 2016; Published 18 January 2017

Academic Editor: Ricardo López-Ruiz

Copyright © 2017 Chang Xiao and Jinsheng Zhou. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.


A combined multinomial pricing model is proposed for pricing mining concession in which the annualized volatility of the price of mineral products follows a multinomial distribution. First, a combined multinomial pricing model is proposed which consists of binomial pricing models calculated according to different volatility values. Second, a method is provided to calculate the annualized volatility and the distribution. Third, the value of convenience yields is calculated based on the relationship between the futures price and the spot price. The notion of convenience yields is used to adjust our model as well. Based on an empirical study of a Chinese copper mine concession, we verify that our model is easy to use and better than the model with constant volatility when considering the changing annualized volatility of the price of the mineral product.