Option Pricing on Renewable Commodity Markets

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Option Pricing on Renewable Commodity Markets

Author Info

Sergio H. Lence
Dermot J. Hayes () (Center for Agricultural and Rural Development (CARD), Food and Agricultural Policy Research Institute (FAPRI))

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Abstract

The paper motivates and proposes a closed-form option-pricing model for markets such as grains or livestock where the price level can be expected to revert to expected production costs. The model suggests that traditional option pricing models will overprice long-term options on these markets.

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Paper provided by Center for Agricultural and Rural Development (CARD) at Iowa State University in its series Center for Agricultural and Rural Development (CARD) Publications with number 02-wp309.

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Date of creation: Jul 2002
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Handle: RePEc:ias:cpaper:02-wp309

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Paper
- Lence, Sergio H. & Hayes, Dermot J., 2002. "Option Pricing on Renewable Commodity Markets," Staff General Research Papers 4093, Iowa State University, Department of Economics. [Downloadable!]
- Lence, Sergio H. & Hayes, Dermot, 2002. "Option Pricing On Renewable Commodity Markets," 2002 Conference, April 22-23, 2002, St. Louis, Missouri 19053, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management. [Downloadable!]

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Bryan R. Routledge & Duane J. Seppi & Chester S. Spatt, 2000. "Equilibrium Forward Curves for Commodities," Journal of Finance, American Finance Association, vol. 55(3), pages 1297-1338, 06. [Downloadable!] (restricted)
Other versions:
- Bryan Routledge & Duane Seppi & Chester Spatt, . "Equilibrium Forward Curves for Commodities," GSIA Working Papers 1997-49, Carnegie Mellon University, Tepper School of Business. [Downloadable!]
- Bryan Routledge & Duane Seppi & Chester Spatt, . "Equilibrium Forward Curves for Commodities," GSIA Working Papers 1997-50, Carnegie Mellon University, Tepper School of Business. [Downloadable!]
Black, Fischer, 1976. "The pricing of commodity contracts," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 167-179. [Downloadable!] (restricted)
Bessembinder, Hendrik, et al, 1995. " Mean Reversion in Equilibrium Asset Prices: Evidence from the Futures Term Structure," Journal of Finance, American Finance Association, vol. 50(1), pages 361-75, March. [Downloadable!] (restricted)
Darrell Duffie & Jun Pan & Kenneth Singleton, 2000. "Transform Analysis and Asset Pricing for Affine Jump-Diffusions," Econometrica, Econometric Society, vol. 68(6), pages 1343-1376, November.
Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June. [Downloadable!] (restricted)

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This page was last updated on 2009-11-6.

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