Crush Spread Pricing and Sensitivity Analysis

Yujing Ye

Proceedings of the International Conference on Financial Innovation, FinTech and Information Technology, FFIT 2022, October 28-30, 2022, Shenzhen, China

Research Article

Crush Spread Pricing and Sensitivity Analysis

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Cite: BibTeX Plain Text

@INPROCEEDINGS{10.4108/eai.28-10-2022.2328408,
    author={Yujing  Ye},
    title={Crush Spread Pricing and Sensitivity Analysis},
    proceedings={Proceedings of the International Conference on Financial Innovation, FinTech and Information Technology, FFIT 2022, October 28-30, 2022, Shenzhen, China},
    publisher={EAI},
    proceedings_a={FFIT},
    year={2023},
    month={4},
    keywords={spread option; soybean market; pricing theory; black-scholes model},
    doi={10.4108/eai.28-10-2022.2328408}
}

Yujing Ye
Year: 2023
Crush Spread Pricing and Sensitivity Analysis
FFIT
EAI
DOI: 10.4108/eai.28-10-2022.2328408

Yujing Ye¹^,*

1: Northeastern University at Qinhuangdao

*Contact email: 20197134@neuq.edu.cn

Abstract

The spread options are widely used in commodities market and one of the most notable options is crush spread. This paper investigates the spread option pricing based on Black-Scholes model and Monte-Carlo simulation in terms of 1 year soybean and soybean oil futures data from Chicago Board of Trade (CBOT). Specifically, the Soybean-oil crush spread is evaluated. According to the sensitivity analysis, the option value increases when the three factors grow. Besides, the rate of change of the option value per unit shows a fluctuation decreasing trend. These results shed light on crush spread’s payoff and provide basic information for investors to react to the change of influencing factors.

Keywords: spread option; soybean market; pricing theory; black-scholes model

Published: 2023-04-14
Publisher: EAI

: http://dx.doi.org/10.4108/eai.28-10-2022.2328408