Under a no-arbitrage assumption, the futures price converges to the spot price at the maturity of the futures contract, where the basis equals zero. Assuming that the basis process follows a modified Brownian bridge process with a zero basis at maturity, we derive the closed-form solutions of...

The growing significance of climate change and carbon financing means it is becoming increasingly important to generically model energy-based assets in a more theoretically consistent and realistic approach. A fundamental feature is supply-demand imbalances and this is modelled by deterministic...

A approaching options on futures contracts in the present paper is argued, on one hand, by the great number of their directions for use (in financial speculation, in managing and risk control, etc.) and, on the other hand, by the fact that in Romania, nowadays, futures contracts and options...

This paper uses a dynamic optimization model to estimate the welfare gains of hedging against commodity price risk for commodity-exporting countries. The introduction of hedging instruments such as futures and options enhances domestic welfare through two channels. First, by reducing export...

Empirical evidence on the pricing behaviour of options on index futures contracts traded on USA and UK futures markets reveals that pricing errors and implied volatility estimates differ systematically across exercise price and time to maturity. The introduction on 17 June 1985 of options on...

Building on the widely-used double-lognormal approach by Bahra (1997), this paper presents a multi-lognormal approach with restrictions to extract risk-neutral probability density functions (RNPs) for various asset classes. The contributions are twofold: first, on the technical side, the paper...

This paper deals with the assessment of options on dividend paying stock and futures options. We start from the case of the underlying asset who does not generate dividend and then switch to an underlying asset which pays a continuous dividend yield. The final conditions and the boundary...