WEIS 2009

Valuating Privacy with Option Pricing Theory


  • One of the key challenges of the information society is responsible handling of personal data. An often-cited reason why people fail to make rational decisions regarding their own informational privacy is the high uncertainty about future consequences of information disclosures today. This paper builds an analogy to financial options and draws on principles of option pricing to account for this uncertainty in the valuation of privacy. For this purpose, the development of a data subject's personal attributes over time and the development of the attribute distribution in the population are modelled as two stochastic processes, which fit into the Binomial Option Pricing Model (BOPM). Possible applications of such valuation methods to guide decision support in future privacy-enhancing technologies (PET) are sketched.


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