On the Timing Option in a Futures Contract

Tomas Bjork and Francesca Biagini
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Francesca Biagini: Dipartimento di Matematica, Universita di Bologna, Postal: Piazza di Porta S. Donato, 5, I-40127 Bologna, Italy

No 619, SSE/EFI Working Paper Series in Economics and Finance from Stockholm School of Economics

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.

Keywords: Futures contract; timing option; optimal stopping (search for similar items in EconPapers)
JEL-codes: G12 G13 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2005-11-09
New Economics Papers: this item is included in nep-fin and nep-fmk
Note: To appear in Mathematical Finance
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http://swopec.hhs.se/hastef/papers/hastef0619.pdf (application/pdf)

Related works:
Journal Article: ON THE TIMING OPTION IN A FUTURES CONTRACT (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:hastef:0619

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