Year: 2025
Author: Tesfamariam Tadesse Welemical, Martin Le Doux Mbele Bidima, Jane Akinyi Aduda
African Journal for Industrial and Applied Mathematics, Vol. 1 (2025), Iss. 1 : pp. 47–62
Abstract
From a 3-factor model of storable commodities discussed by Liu and Tang (2010), we consider a cash market model such as futures exchange with a single futures contract on one such commodities and a money market account. After verifying that this model is arbitrage-free and incomplete in any finite time horizon or delivery date, we show that there still exists a possibility to generate exponentially growth risk-less profit in long term; a form of asymptotic arbitrage conjectured by F ¨ollmer and Schachermayer (2008) and first solved by Mbele Bidima and R´asonyi (2012) in financial security models. And we find that works in this paper generalize our recent works in Tadesse Welemical et al. (2019) on Schwartz’s one-factor model of commodity futures.
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Journal Article Details
Publisher Name: Global Science Press
Language: English
DOI: https://doi.org/10.4208/ajiam.2025-0003
African Journal for Industrial and Applied Mathematics, Vol. 1 (2025), Iss. 1 : pp. 47–62
Published online: 2025-01
AMS Subject Headings:
Copyright: COPYRIGHT: © Global Science Press
Pages: 16
Keywords: Asymptotic exponential arbitrage commodity market futures contract large deviation.