A Framework for Asset Pricing in Non-Fungible Tokens

Abstract

This study discusses the valuation and asset pricing of non-fungible tokens (NFTs), which are digital assets that represent unique items. The authors put forward a comprehensive framework for pricing NFTs and implementing asset pricing models in the NFT asset class. NFTs present a relatively difficult pricing problem, as the numerous idiosyncrasies of the NFT market have to be taken into account. The difficulties include the unique heterogeneous nature of NFTs, illiquid trading, limited data availability, high dimensionality of features relative to the available data, and the volatile time-varying price dynamics. The framework presented could potentially be expanded to the pricing of other “non-fungible” assets such as art, collectibles, and real estate.