The design and pricing of fixed‐ and moving‐window contracts: An application of Asian‐Basket option pricing methods to the hog‐finishing sector

Renyuan Shao and Brian Roe

Journal of Futures Markets, 2003, vol. 23, issue 11, 1047-1073

Abstract: Asian‐Basket‐type moving‐window contracts are an increasingly used risk‐management tool in the North American hog sector. The moving‐window contract is decomposed into a portfolio of a long Asian‐Basket put and a short Asian‐Basket call option. A projected break‐even price is used to determine the floor price, and then Monte Carlo simulation methods are used to price both a moving‐ and a fixed‐window contract. These methods provide unbiased pricing of fixed‐ and moving‐window hog‐finishing contracts of 1‐year duration. © 2003 Wiley Periodicals, Inc. Jrl Fut Mark 23:1047–1073, 2003

Date: 2003
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Related works:
Working Paper: THE DESIGN AND PRICING OF FIXED AND MOVING WINDOW CONTRACTS: AN APPLICATION OF ASIAN-BASKET OPTION PRICING METHODS TO THE HOG FINISHING SECTOR (2002)
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