On the future contract quality option: a new look

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dc.contributor.author Balbás, Alejandro
dc.contributor.author Reichardt, Susana
dc.date.accessioned 2012-01-23T16:01:55Z
dc.date.available 2012-01-23T16:01:55Z
dc.date.issued 2010-07
dc.identifier.bibliographicCitation Applied Financial Economics, 2010, v. 20, nº 15, pp. 1217-1229
dc.identifier.issn 0960-3107
dc.identifier.uri http://hdl.handle.net/10016/13050
dc.description.abstract This article provides a new method for replicating and pricing the quality options usually embedded in many future contracts. The replicating strategies may draw on both the future contract as well as its related calls and puts. They also yield the quality option theoretical price in perfect markets, as well as upper and lower bounds for its bid or ask prices if frictions are incorporated. With respect to previous literature, this new approach seems to reflect five contributions: First, the analysis does not depend on any dynamic assumption concerning the Term Structure of Interest Rates (TSIR) behaviour; second, it incorporates the information contained in calls and puts on the future contract; third, it allows us to use real market perfectly synchronized prices; fourth, transaction costs can be considered and, finally, this article shows that the quality option may be a useful security in the portfolio of many traders. These traders will make the future contract more effective as a hedging instrument. This article also presents an empirical test involving the German market.
dc.description.sponsorship This research was partially supported by MEyC (Spain), grant no. ECO2009-14457-C04
dc.format.mimetype application/pdf
dc.language.iso eng
dc.publisher Routledge
dc.relation.isversionof http://hdl.handle.net/10016/126
dc.rights ©Taylor & Francis
dc.subject.other Term structure of interest rates
dc.subject.other Quality
dc.subject.other Prices
dc.title On the future contract quality option: a new look
dc.type article
dc.description.status Publicado
dc.relation.publisherversion http://dx.doi.org/10.1080/09603107.2010.482515
dc.subject.eciencia Empresa
dc.identifier.doi 10.1080/09603107.2010.482515
dc.rights.accessRights openAccess
dc.relation.projectID Comunidad de Madrid. S2009/ESP-1685/RIESGOS
dc.type.version acceptedVersion
dc.identifier.publicationfirstpage 1217
dc.identifier.publicationissue 15
dc.identifier.publicationlastpage 1229
dc.identifier.publicationtitle Applied Financial Economics
dc.identifier.publicationvolume 20
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