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The purpose of this study is to identify the cricketers who were able to justify their salary by their on‐field performance in the Indian Premier League (IPL).

A measure is developed to quantify the batting, bowling and wicket keeping performance of a cricketer into one single index called as the performance index. Based on the performance index of cricketers, from first three seasons of IPL, and using the binomial option pricing model, the neutral present values of the cricketers are determined. The distributional pattern of the present values of cricketers is identified and cricketers are classified based on the level of present values. Similarly, the distributional pattern of the bid prices of cricketers is identified and the cricketers are classified on the level of their bid prices. The cross tabulation of the classified bid prices and classified present values, can be used to identify the cricketers who were able to justify their salaries.

The study can spell out which players had amplified their bid prices and to what extent by their on‐field performances.

The performance measure developed in the paper does not consider the fielding skill of the cricketers, as there is no established measure for fielding performance in the game of cricket. Another limitation of the study is that the risk neutral probabilities for the upward and downward states, for the different time periods are assumed to be constant. However, in real life situations these risk neutral probabilities may not be constant for the different time periods.

The proposed model of performance measurement can also be used in several other professional sports. As the idea of IPL works, on franchisee‐system based of hiring players and transfers, so the same model can be applicable to all such sports like football, rugby, baseball where such system exists. This may be helpful to the franchisee to decide on which players should be considered and who should to be dropped for a given price. The players can also use this model to understand what their market price should be and ensure that they are not underpaid.

The article is the first of its kind and hence original in nature.