Derivatives on nonstorable renewable resources: Fish futures and options, not so fishy after all

Ewald, C.-O. (2013) Derivatives on nonstorable renewable resources: Fish futures and options, not so fishy after all. Natural Resource Modeling, 26(2), pp. 215-236. (doi:10.1111/j.1939-7445.2012.00135.x)

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Abstract

We study forwards and European call options, which are written on a nonstorable renewable resource. Examples of such derivatives in form of futures on fresh catch of wild salmon for the United States and the recently created Fish Pool market in Norway, where futures on a composite of wild catch and farmed salmon are traded, will be discussed. We approach the problem of pricing these contracts from first principles, starting off by modeling the dynamics of the resource reserves, and assuming that in approximation resource extraction is managed as open access. We derive formulas for the forward price of the renewable resource as well as European call options written on it.

Item Type:Articles
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:Ewald, Professor Christian
Authors: Ewald, C.-O.
College/School:College of Social Sciences > Adam Smith Business School > Accounting and Finance
Journal Name:Natural Resource Modeling
Publisher:Wiley
ISSN:0890-8575
ISSN (Online):1939-7445
Published Online:25 July 2012

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