The Quality Option and Timing Option in Futures Contracts.
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Abstract
A method is developed for pricing the quality option in futures contracts where there are several deliverable assets. The interaction of the timing option and the quality option is examined. Numerical estimates are provided to illustrate the dependence of the quality option on the number of underlying assets. The magnitude of the timing option is examined in the case of two deliverable assets. Copyright 1989 by American Finance Association.