On the Timing Option in a Futures Contract

The timing option embedded in a futures contract allows the short position to decide when to deliver the underlying asset during the last month of the contract period. <p> In this paper we derive, within a very general incomplete market framework, an explicit model independent formula for the futures price process in the presence of a timing option. We also provide a characterization of the optimal delivery strategy, and we analyze some concrete examples.

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Year of publication:	2005-11-09
Authors:	Björk, Tomas ; Biagini, Francesca
Institutions:	Economics Institute for Research (SIR), Handelshögskolan i Stockholm
Subject:	Futures contract \| timing option \| optimal stopping

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Extent:	application/pdf
Series:	SSE/EFI Working Paper Series in Economics and Finance.
Type of publication:	Book / Working Paper
Language:	English
Notes:	To appear in Mathematical Finance The text is part of a series SSE/EFI Working Paper Series in Economics and Finance Number 619 20 pages
Classification:	G12 - Asset Pricing ; G13 - Contingent Pricing; Futures Pricing
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005649426