Utility of a Derivative in the Presence of Secondary Markets and Without Secondary Markets

[sirinath]

The utility of any instrument would be different when there are
secondary markets. The valuation of such instruments should take this
into account!

With regard to option pricing models, I feel the model only shows the
utility of the parties for over the counter markets. Options can be
sold and bought back in the secondary market.

If this was not the case and the buyer is compelled to hold it to
expiration or exercise, then the payoffs can be modeled using a
replicating portfolio.

Please be good enough to comment on this.

Best regards, Suminda Sirinath Salpitikorala Dharmasena