Clabacus: A Risk-Adjusted Cloud Resources Pricing Model Using Financial Option Theory

Abstract

In Cloud computing, clients would like to pay fair price for the resources while providers would like to make profit for their services. In this study, we propose a Cloud Compute Commodity (C3 ) pricing architecture called Clabacus(Cloud-Abacus) to serve both parties. We use concepts and algorithms from financial option theory to develop Clabacus. We propose a general formula, called compound-Moores law, that captures the technological advances of the resources, rate of inflation and depreciation etc. We map these Cloud parameters to the option pricing parameters to effectively modify the option pricing algorithm in order to compute Cloud resource price. Using financial value-at-risk (VaR) a..