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Wanted: No Arbitrage, Dead Or Alive: A Comparison Of Hedging With Futures Contracts Or Resource Reserves For Arbitrage-Free Resource Harvest Contract Valuation

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  • Burnes, Ellen

Abstract

We develop a valuation model based on conservation rules, and stochastic prices and inventories. Dynamic programming determines the optimal harvest amount. A hedge portfolio based on a resource reserve is proposed. The optimal size of the reserve is determined, as well as its value.

Suggested Citation

  • Burnes, Ellen, 2000. "Wanted: No Arbitrage, Dead Or Alive: A Comparison Of Hedging With Futures Contracts Or Resource Reserves For Arbitrage-Free Resource Harvest Contract Valuation," 2000 Annual meeting, July 30-August 2, Tampa, FL 21872, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea00:21872
    DOI: 10.22004/ag.econ.21872
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    References listed on IDEAS

    as
    1. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
    2. Brennan, Michael J & Schwartz, Eduardo S, 1985. "Evaluating Natural Resource Investments," The Journal of Business, University of Chicago Press, vol. 58(2), pages 135-157, April.
    3. Kenneth J. Arrow & Anthony C. Fisher, 1974. "Environmental Preservation, Uncertainty, and Irreversibility," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 88(2), pages 312-319.
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