Asymptotic Exponential Arbitrage in the Schwartz Commodity Futures Model

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: Tesfamariam Tadesse Welemical, Jane Akinyi Aduda, Martin Le Doux Mbele Bidima
Format: Article
Language:English
Published: Hindawi Limited 2019-01-01
Series:International Journal of Mathematics and Mathematical Sciences
Online Access:http://dx.doi.org/10.1155/2019/9450435
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spelling doaj-42a225e7cc2040b8a93f770622ec95272020-11-24T22:16:02ZengHindawi LimitedInternational 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
collection DOAJ
language English
format Article
sources DOAJ
author Tesfamariam Tadesse Welemical
Jane Akinyi Aduda
Martin Le Doux Mbele Bidima
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
author_facet Tesfamariam Tadesse Welemical
Jane Akinyi Aduda
Martin Le Doux Mbele Bidima
author_sort Tesfamariam Tadesse Welemical
title Asymptotic Exponential Arbitrage in the Schwartz Commodity Futures Model
title_short 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_sort asymptotic exponential arbitrage in the schwartz commodity futures model
publisher Hindawi Limited
series International Journal of Mathematics and Mathematical Sciences
issn 0161-1712
1687-0425
publishDate 2019-01-01
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.
url http://dx.doi.org/10.1155/2019/9450435
work_keys_str_mv AT tesfamariamtadessewelemical asymptoticexponentialarbitrageintheschwartzcommodityfuturesmodel
AT janeakinyiaduda asymptoticexponentialarbitrageintheschwartzcommodityfuturesmodel
AT martinledouxmbelebidima asymptoticexponentialarbitrageintheschwartzcommodityfuturesmodel
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