Fundamentals and Literature Review
The purpose of this section is to outline the key concepts of financial theory, financial markets and arbitrage-free pricing. Global and regional trade nowadays highly depend on the existence of markets, e.g., real estate markets, agricultural markets, or financial markets. Trade takes places at a market which constitutes binding guidelines for all participants in order to guarantee fast and efficient trades. A market is “a means by which the exchange of goods and services takes place as a result of buyers and sellers being in contact with each others” (cp. Enceclopædia Britannica (2005)). Consequently, a financial market deals with financial products such as stocks, futures, or option contracts.
KeywordsOption Price Inventory Level Commodity Price Spot Market Hedging Strategy
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