ON THE TIMING OPTION IN A FUTURES CONTRACT

Francesca Biagini and Tomas Bjork

Mathematical Finance, 2007, vol. 17, issue 2, 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.

Date: 2007
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Citations: View citations in EconPapers (5)

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https://doi.org/10.1111/j.1467-9965.2006.00303.x

Related works:
Working Paper: On the Timing Option in a Futures Contract (2005)
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