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Scientific Conference DGVFM Cologne th April On the Futures Contract

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					       5. Scientific Conference DGVFM Cologne 26th April 2006



              On the Timing Option in a Futures Contract
                      (joint work with T. Bjoerk)



                              Francesca Biagini
                              University of Munich



                                   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.

				
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