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

25 Pages Posted: 6 Sep 2009 Last revised: 15 Jul 2013

See all articles by Christian-Oliver Ewald

Christian-Oliver Ewald

University of Glasgow; Høgskole i Innlandet

Date Written: October 26, 2011

Abstract

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.

Keywords: Options, Commodities, Renewable Resources, Risk management

JEL Classification: C63, G11, G31, G39

Suggested Citation

Ewald, Christian-Oliver, Derivatives on Non-Storable Renewable Resources: Fish Futures and Options, Not so Fishy After All (October 26, 2011). Available at SSRN: https://ssrn.com/abstract=1469135 or http://dx.doi.org/10.2139/ssrn.1469135

Christian-Oliver Ewald (Contact Author)

University of Glasgow ( email )

Adam Smith Building
Glasgow, Scotland G12 8RT
United Kingdom

Høgskole i Innlandet ( email )

Lillehammer, 2624
Norway

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