Can overfishing be reduced and livelihood be maintained? You can have your cake and eat it
In this paper, we introduce a fishery option written on the cumulative harvest over a short specified period. The
aim is to examine whether derivatives can help reduce overfishing and maintain the livelihood of fishermen. As a short
period is considered, we assume that each fisherman adopts a constant fishing effort over this period. The issue of options
written on fishery resources has been studied in Ewald (2013). Nevertheless, our paper differs from Ewald (2013) in several
aspects. The option considered in Ewald (2013) is a European-type one, which is written on a fish price index. In addition, he
studies the problem mainly from a finance perspective, i.e., it focuses on the derivation of the fair price. In this paper, the
fishery option is a path-dependent one and we study the problem from an environmental economics perspective.
Keywords—Binomial Tree Model, Fishery Model, Fishery options.