Derivatives on Non-Storable Renewable Resources : Fish Futures and Options, Not so Fishy After All

We study forwards and European call options, which are written on a non-storable renewable resource. Examples of such derivatives in form of futures on fresh catch of wild salmon for the US and the recently created Fish Pool market in Norway, where futures on a composite of wild catch and farmed salmon are traded, will be discussed. We approach the problem of pricing these contracts from first principles, starting off by modelling the dynamics of the resource reserves, and assuming that in approximation resource extraction is managed as open access. We derive formulas for the forward price of the renewable resource as well as European call options written on it