Pricing Bounded Value Based Salam
Pricing Bounded Value Based Salam

Summary/Abstract: Salam is a contract in which advance payment is made for goods to be delivered at a future date. The main disadvantage of this contract is the variation of good's price at maturity. To resolve this issue, we use classically the Value-based Salam where the value of the good is defined as quantity time unit price. This solution permits the hedge the buyer and the seller against fluctuations in price's good but the quantity to be received at maturity can undergo unlimited changes. In this work we propose a new approach to model Value-based Salam where the quantity to be received is Bounded and known.

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