The value of the early unwind option in futures contracts with an endogenous basis

Arbeitspapier

In this paper the implicit early unwind option of a risk neutral arbitrageur is valued. The problem is analyzed in a market microstructure framework where four different groups of market participants interact. Within this model the equilibrium price relationship between stock and futures markets is determined. Since the underlying of the option is influenced by arbitrage trading the underlying of the option depends contrary to standard option pricing theory on the unwind option itself. The non-Markovian stochastic process of the basis is characterized and the results of an extensive comparative static analysis of the option value are presented.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ZEW Discussion Papers ; No. 94-06

Classification and Topics

• Classification: Wirtschaft
• Subject: Termingeschäft ; Arbitragegeschäft ; Capital Asset Pricing Model ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bühler, Wolfgang ; Kempf, Alexander
• Event: Veröffentlichung
• (who): Zentrum für Europäische Wirtschaftsforschung (ZEW) ; ZBW – Leibniz Information Centre for Economics
• (where): Mannheim
• (when): 1994

Further information

• Handle: http://hdl.handle.net/10419/29420
• Last update: 10.03.2025, 11:44 AM CET