| This paper estimates values of the delivery options implicit in the CBOT corn futures contract. Joint values of the timing and location options are estimated for the years 1989-97. By interacting the effects of the two delivery options, a potentially more accurate estimates are obtained. Two models are presented that rely on different assumptions about the institutional setup of the delivery process. The first model approximates the discreteness of the three day delivery process, while the second model relies on an assumption of immediate delivery that is consistent with the existing literature on pricing options. Individual hedgers can use these models to help them make delivery decisions. When all the costs of delivery are incorporated, true value of the... |
