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Real Estate Transactions in Ancient Israel: Excavating Embedded Options Utilizing Modern Finance

An economic setting of ancient Jewish law is analyzed and reinterpreted in light of a modern formal finance model. Certain real estate transactions in ancient Israel, as stipulated in the Bible, involved embedded financial options that seem to have been overlooked by the commentators. This paper interprets, utilizing modern financial theory, the Biblical text and sheds light on a phrase used in stipulating these rules that has puzzled some commentators. The option's value and the complexity of the pricing system that would have been needed in order to capture true market prices of these assets, is demonstrated.