Skip to main content
Journal cover image

Futures markets and commodity options: Hedging and optimality in incomplete markets

Publication ,  Journal Article
Breeden, DT
Published in: Journal of Economic Theory
January 1, 1984

This paper examines the allocational roles of futures markets and commodity options in multi-good and multi-period economies. In a continuous-time model with time-additive utilities and homogeneous beliefs, trading in "unconditional" futures contracts, the market portfolio and a riskless asset gives any Pareto-optimal allocation. Individuals' optimal holdings of futures contracts in the continuous-time model are related to their consumption bundles and to their risk tolerances. It is shown that both hedging and "reverse hedging" behavior are possible. In the general model with discrete trading, options on portfolios of commodity options are shown to permit any unconstrained Pareto-optimal allocation. © 1984.

Duke Scholars

Published In

Journal of Economic Theory

DOI

EISSN

1095-7235

ISSN

0022-0531

Publication Date

January 1, 1984

Volume

32

Issue

2

Start / End Page

275 / 300

Related Subject Headings

  • Economic Theory
  • 1499 Other Economics
  • 1401 Economic Theory
 

Citation

APA
Chicago
ICMJE
MLA
NLM
Breeden, D. T. (1984). Futures markets and commodity options: Hedging and optimality in incomplete markets. Journal of Economic Theory, 32(2), 275–300. https://doi.org/10.1016/0022-0531(84)90055-3
Breeden, D. T. “Futures markets and commodity options: Hedging and optimality in incomplete markets.” Journal of Economic Theory 32, no. 2 (January 1, 1984): 275–300. https://doi.org/10.1016/0022-0531(84)90055-3.
Breeden DT. Futures markets and commodity options: Hedging and optimality in incomplete markets. Journal of Economic Theory. 1984 Jan 1;32(2):275–300.
Breeden, D. T. “Futures markets and commodity options: Hedging and optimality in incomplete markets.” Journal of Economic Theory, vol. 32, no. 2, Jan. 1984, pp. 275–300. Scopus, doi:10.1016/0022-0531(84)90055-3.
Breeden DT. Futures markets and commodity options: Hedging and optimality in incomplete markets. Journal of Economic Theory. 1984 Jan 1;32(2):275–300.
Journal cover image

Published In

Journal of Economic Theory

DOI

EISSN

1095-7235

ISSN

0022-0531

Publication Date

January 1, 1984

Volume

32

Issue

2

Start / End Page

275 / 300

Related Subject Headings

  • Economic Theory
  • 1499 Other Economics
  • 1401 Economic Theory