ON THE PRICING OF CROSS CURRENCY FUTURES OPTIONS FOR CANADIAN GRAINS AND LIVESTOCK

Calum Turvey and Shihong Yin

No 34123, Working Papers from University of Guelph, Department of Food, Agricultural and Resource Economics

Abstract: This paper explores the problem of pricing an option on the cash commodity in Canadian dollars when the commodity is priced relative to a U.S. futures market. A general options pricing model is developed that separates out the value of a quantos risk and basis risk. The paper uses daily data for cattle, corn and soybeans in Ontario, and the model is employed to price the option on the cash commodity with basis risk and the option on a quantos, without basis risk. The relationship between the pricing model and over-the-counter options and market revenue insurance is also discussed.

Keywords: Marketing (search for similar items in EconPapers)
Pages: 16
Date: 2002
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: On the Pricing of Cross Currency Futures Options for Canadian Grains and Livestock (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uguewp:34123

DOI: 10.22004/ag.econ.34123

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