Introducing a new coffee futures pricing model for the Nairobi Securities Exchange

Abstract

This study intends to apply a different pricing model for pricing coffee futures at the Nairobi Securities Exchange and suggest an improvement of the existing pricing model currently used at the NSE. This will be done by using Schwartz’s model 1 to generate coffee Futures prices, and compare the prices generated by the model with the model currently used to price coffee futures at the NSE. The difference between the series of prices generated by the two models will be tested for significance, and thus guide on whether introducing a new pricing model for the coffee Exchange will have an impact on the current pricing model.