DERIVATIVES ON NONSTORABLE RENEWABLE RESOURCES: FISH FUTURES AND OPTIONS, NOT SO FISHY AFTER ALL
Article first published online: 25 JUL 2012
Copyright © 2012 Wiley Periodicals, Inc.
Natural Resource Modeling
Volume 26, Issue 2, pages 215–236, May 2013
How to Cite
EWALD, C.-O. (2013), DERIVATIVES ON NONSTORABLE RENEWABLE RESOURCES: FISH FUTURES AND OPTIONS, NOT SO FISHY AFTER ALL. Natural Resource Modeling, 26: 215–236. doi: 10.1111/j.1939-7445.2012.00135.x
- Issue published online: 22 APR 2013
- Article first published online: 25 JUL 2012
- Received by the editors on 23rd March 2012. Accepted 21st june 2012.
- Renewable resources;
- risk management;
- fishery economics;
- futures markets;
Abstract We study forwards and European call options, which are written on a nonstorable renewable resource. Examples of such derivatives in form of futures on fresh catch of wild salmon for the United States and the recently created Fish Pool market in Norway, where futures on a composite of wild catch and farmed salmon are traded, will be discussed. We approach the problem of pricing these contracts from first principles, starting off by modeling the dynamics of the resource reserves, and assuming that in approximation resource extraction is managed as open access. We derive formulas for the forward price of the renewable resource as well as European call options written on it.