6533b853fe1ef96bd12ad468
RESEARCH PRODUCT
On the Pricing and Hedging of Options on Commodity Forward and Futures Contracts - A Note
Valeriy Zakamulinsubject
Spot contractForward contractFinancial economicsNormal backwardationForward priceForward marketBusinessHedge (finance)Futures contractSpread tradedescription
In recent years there appeared some organized markets for forward contracts and options on these contracts. In this paper we review shortly the organization of trade on a centralized forward market. Assuming a friction-free market with constant interest rate we build a consistent continuous time framework for the valuation and hedging of options on a forward or a futures contract. This framework takes into account the peculiarities of a forward/futures contract. In our framework we consider the pricing and hedging of options on a forward contract and reconsider the Black-76 model for the pricing and hedging of options on a futures contract.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2007-01-01 | SSRN Electronic Journal |