Pricing of Cognitive Radio Rights to Maintain the Risk-Reward of Primary User Spectrum Investment

Cognitive Radio (CR) has been recently proposed as a method of alleviating the shortage of radio spectrum, by increasing the efficiency of spectrum use. However, as large portions of spectrum remain under long-term licenses, the economic welfare of the primary license holders must be taken into account, when considering methods of spectrum access that may degrade license holder Quality-of-Service (QoS) and therefore revenue. Several price discovery methods have been proposed to find the fee that license holders should charge for cognitive access to their spectrum. This paper examines the spectrum licenses themselves as an investment class. By performing a reward-to-variability (Sharpe Ratio) analysis of the spectrum license under different levels of CR activity, a floor price for CR access is derived such that the quality of the license holder´s spectrum investment from a Sharpe Ratio point of view is not degraded. An example scenario is provided to illustrate this pricing mechanism, and simulation results illustrate its effectiveness in maintaining the quality of the license holder´s spectrum investment.