Asymptotic Exponential Arbitrage in the Schwartz Commodity Futures Model
In this paper, we consider the Schwartz’s one-factor model for a storable commodity and a futures contract on that commodity. We introduce the analysis of asymptotic arbitrage in storable commodity models by proving that the futures prices process allows asymptotic exponential arbitrage with geometr...
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| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
Wiley
2019-01-01
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| Series: | International Journal of Mathematics and Mathematical Sciences |
| Online Access: | http://dx.doi.org/10.1155/2019/9450435 |
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| Summary: | In this paper, we consider the Schwartz’s one-factor model for a storable commodity and a futures contract on that commodity. We introduce the analysis of asymptotic arbitrage in storable commodity models by proving that the futures prices process allows asymptotic exponential arbitrage with geometric decaying failure probability. Next, we find by comparison that, under some similar conditions, our result is a corresponding commodity assets (stronger) version of Föllmer and Schachermayer’s result stated in the modeling setting of geometric Ornstein-Uhlenbeck process for financial security assets. |
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| ISSN: | 0161-1712 1687-0425 |