Template for pricing the right of first refusal

Shelley and Chris,

I have set up a template for pricing ROFRs. The ROFR is priced as a series
forward start options.

A forward start option gives the holder the right to exercise the option but
the strike price
is set at the money in future before the option expiration. The feature
mimics the "matching the best bid"
in the ROFR. The underlying for the option is the "best bid", which should
be closely related to the
price differential between the two hubs that the pipeline connects. Therefore
the ROFR is case dependent,
as Vince pointed out. The volatility can be estimated from the "best bid"
price history.

With these inputs we can estimate the value of ROFR. If you have any
questions concerning the model
please feel free to call me or Vince.

Zimin Lu