ON THE TIMING OPTION IN A FUTURES CONTRACT |
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Authors: | Francesca,Biagini Tomas,Bjö rk |
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Affiliation: | Dipartimento di Matematica, Universitàdi Bologna; Department of Finance, Stockholm School of Economics |
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Abstract: | 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. 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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Keywords: | futures contract timing option optimal stopping |
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