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.
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