On the timing option in a futures contract

Biagini, Francesca and Björk, Tomas (2007): On the timing option in a futures contract. In: Mathematical Finance, Vol. 17, No. 2: pp. 267-283

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.

• Item Type: Journal article
• Faculties: Mathematics, Computer Science and Statistics > Mathematics > Workgroup Financial Mathematics
• Subjects: 500 Science > 510 Mathematics
• ISSN: 0960-1627
• Language: English