Using Monte Carlo methods for valuation of intangible assets in sports economics

Sports economics, especially soccer, football, baseball and basketball, is not just a sport, but also a powerful branch of industry for investors and gamblers. Clubs, managers and players start to act like an ordinary market participant. One of the most important assets on a sport’s transfer market are players’ performance rights. The one of the most popular games in the world is football, called soccer in USA. Every two years, in June and July during the championships of Europe or the world, the market begins to be more dynamic. Journalists make rankings of national teams based on the individual values of players. It creates the need for objective valuation without any noises caused by the “championships games bubble”. It also means that managers, club owners and the footballers’ agents have to monitor of a footballer’s value in case of a sudden disadvantageous change.

This article indicates the possibilities of using Monte Carlo simulation methods in players’ performance rights value monitoring. The authors hypothesize that Monte Carlo methods (MC) and econometric models of the player’s life cycle could give the managers of clubs another source of information for the decision process. The MC method in finance is usually used to value the option price on the basis of the assumed distribution of price changes. Here the method was used to determine the future hypothetical value of footballers’ performance rights. Using econometric models of the player’s life cycle we observe and analyse phases in the life cycle of a football player and determinants of the volatility.

In this article we use historical data of the market values of chosen football players from the web site http://transfermarkt.de. We chose to analyzepopular valuable players after the growth phase of their life cycle. For the visualisation of the “championships games bubble” problem, we analyze times before and after Union of European Football Association (UEFA) EURO 2016 games. The opportunities and threats of a such an attempt are examined.