Options on Commodity Forward Contracts
Published Online:1 Oct 1985https://doi.org/10.1287/mnsc.31.10.1232
Abstract
We develop formulas for “European” options on commodity forward contracts. The assumptions and derivations are simple. The qualitative behavior of the formulas is developed for an intuitive overview. The put formula and related ideas were applied to successfully manage a quarter billion dollar hedge of GNMA futures versus standbys.
