On the Timing Option in a Futures Contract

17 Pages Posted: 19 Mar 2007

See all articles by Francesca Biagini

Francesca Biagini

University of Bologna - Department of Mathematics

Tomas Bjork

Stockholm School of Economics - Swedish House of Finance

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.

Suggested Citation

Biagini, Francesca and Bjork, Tomas, On the Timing Option in a Futures Contract. Mathematical Finance, Vol. 17, No. 2, pp. 267-283, April 2007. Available at SSRN: https://ssrn.com/abstract=974938 or http://dx.doi.org/10.1111/j.1467-9965.2006.00303.x

Francesca Biagini (Contact Author)

University of Bologna - Department of Mathematics ( email )

Piazzadi Porta San Donato, 5
Bologna, 40126
Italy

Tomas Bjork

Stockholm School of Economics - Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

Register to save articles to
your library

Register

Paper statistics

Downloads
13
Abstract Views
623
PlumX Metrics