Options on the spot market
Part of the Natural Resource Management and Policy book series NRMP, volume 15 Abstract Most of the discussion of water markets revolves around the concept of trading permanent water rights, which implicitly assumes that the water property rights are adequately defined and transaction costs are not a significant barrier to trade.
While this situation is relevant to several countries and areas in the U. Given excessive costs for water rights trades, there is still significant potential for the market reallocation of water, using annual spot markets for times of scarcity and option markets for longer-term contracts.
Option Spot Price vs. Underlying Spot Price
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