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The Third Workshop on
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On the Timing Option in a Futures Contract
Tomas Bjork, Francesca Biagini
Abstract
The timing option embedded in a futures contract allows the short
position to decide when to deliver the underlying asset during the
last month of the contract period. In this paper we derive, within a very
general incomplete market framework, an explicit model
independent formula for the futures
price process in the presence of a timing option. We also provide a
characterization of the optimal delivery strategy, and we analyze
some concrete examples.