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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| Format: | Article |
| Language: | English |
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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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| author | Tesfamariam Tadesse Welemical Jane Akinyi Aduda Martin Le Doux Mbele Bidima |
| author_facet | Tesfamariam Tadesse Welemical Jane Akinyi Aduda Martin Le Doux Mbele Bidima |
| author_sort | Tesfamariam Tadesse Welemical |
| collection | DOAJ |
| description | 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. |
| format | Article |
| id | doaj-art-42a225e7cc2040b8a93f770622ec9527 |
| institution | Kabale University |
| issn | 0161-1712 1687-0425 |
| language | English |
| publishDate | 2019-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | International Journal of Mathematics and Mathematical Sciences |
| spelling | doaj-art-42a225e7cc2040b8a93f770622ec95272025-02-03T05:52:41ZengWileyInternational Journal of Mathematics and Mathematical Sciences0161-17121687-04252019-01-01201910.1155/2019/94504359450435Asymptotic Exponential Arbitrage in the Schwartz Commodity Futures ModelTesfamariam Tadesse Welemical0Jane Akinyi Aduda1Martin Le Doux Mbele Bidima2Pan African University for Basic Sciences, Technology and Innovation, JKUAT, P.O. Box 6200000200 Nairobi, KenyaJomo Kenyatta University of Agriculture and Technology, P.O. Box 6200000200 Nairobi, KenyaDepartment of Mathematics, University of Yaounde I, P.O. Box 823 Yaounde, CameroonIn 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.http://dx.doi.org/10.1155/2019/9450435 |
| spellingShingle | Tesfamariam Tadesse Welemical Jane Akinyi Aduda Martin Le Doux Mbele Bidima Asymptotic Exponential Arbitrage in the Schwartz Commodity Futures Model International Journal of Mathematics and Mathematical Sciences |
| title | Asymptotic Exponential Arbitrage in the Schwartz Commodity Futures Model |
| title_full | Asymptotic Exponential Arbitrage in the Schwartz Commodity Futures Model |
| title_fullStr | Asymptotic Exponential Arbitrage in the Schwartz Commodity Futures Model |
| title_full_unstemmed | Asymptotic Exponential Arbitrage in the Schwartz Commodity Futures Model |
| title_short | Asymptotic Exponential Arbitrage in the Schwartz Commodity Futures Model |
| title_sort | asymptotic exponential arbitrage in the schwartz commodity futures model |
| url | http://dx.doi.org/10.1155/2019/9450435 |
| work_keys_str_mv | AT tesfamariamtadessewelemical asymptoticexponentialarbitrageintheschwartzcommodityfuturesmodel AT janeakinyiaduda asymptoticexponentialarbitrageintheschwartzcommodityfuturesmodel AT martinledouxmbelebidima asymptoticexponentialarbitrageintheschwartzcommodityfuturesmodel |