Valuation of a locational spread option: the case of tomatoes in Nairobi and Mombasa Counties in Kenya

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dc.contributor.authorKimathi, Kenneth Gitonga
dc.date.accessioned2018-10-18T06:56:03Z
dc.date.available2018-10-18T06:56:03Z
dc.date.issued2018
dc.descriptionA Dissertation submitted in partial fulfillment of the requirements for the Master of Science in Mathematical Finance (MSc.MF) at Strathmore Universityen_US
dc.description.abstractLocational Spread Options are financial instruments that can be used by traders wishing to purchase but not physically acquire produce; to hedge their risks, and / or to take speculative positions, based on their knowledge of market dynamics. In this study, we analyze historical tomato price data in Nairobi & Mombasa counties in Kenya; and observe that the Ornstein Uhlenbeck process best captures the price dynamics due to the mean reverting characteristics noted in the deseasonalized price data. We then derive pricing equations and estimate the model parameters via the use of Maximum Likelihood Estimation. Finally, we use these parameter estimations to perform Monte Carlo simulations, using the antithetic variate variance reduction technique to obtain the option price.en_US
dc.identifier.urihttp://hdl.handle.net/11071/5968
dc.language.isoenen_US
dc.publisherStrathmore Universityen_US
dc.subjectLocational Spread Optionsen_US
dc.subjectFinancial Instrumentsen_US
dc.subjectTomato Price Dataen_US
dc.subjectOrnstein Uhlenbecken_US
dc.subjectMaximum Likelihood Estimationen_US
dc.titleValuation of a locational spread option: the case of tomatoes in Nairobi and Mombasa Counties in Kenyaen_US
dc.typeThesisen_US
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MSc.MF Theses and Dissertations (2018)