Cloud Asset Pricing Tree (CAPT) Elastic Economic Model for Cloud Service Providers

Abstract

Abstract: Cloud providers are incorporating novel techniques to cope with prospective aspects of trading like resource allocation over future demands and its pricing elasticity that was not foreseen before. To leverage the pricing elasticity of upcoming demand and supply, we employ financial option theory (future contracts) as a mech-anism to alleviate the risk in resource allocation over future demands. This study introduces a novel Cloud Asset Pricing Tree (CAPT) model that finds the optimal premium price of the Cloud federation options ef-ficiently. Providers will benefit by this model to make decisions when to buy options in advance and when to exercise them to achieve more economies of scale. The CAPT model adapts its structure to address the price elasticity concerns and makes the demand, price inelastic and the supply, price elastic. Our empirical evidences suggest that using the CAPT model, exploits the Cloud market potential as an opportunity for more resource utilization and future capacity planning.