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Author : Martin Christian Richter
Publisher :
ISBN 13 :
Total Pages : 45 pages
Book Rating : 4.:/5 (464 download)
Download or read book Stochastic Volatility and Seasonality in Commodity Futures and Options written by Martin Christian Richter and published by . This book was released on 2002 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Juan Arismendi-Zambrano
Publisher :
ISBN 13 :
Total Pages : 53 pages
Book Rating : 4.:/5 (13 download)
Download or read book Seasonal Stochastic Volatility written by Juan Arismendi-Zambrano and published by . This book was released on 2019 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: Many commodity markets contain a strong seasonal component not only at the price level, but also in volatility. In this paper, the importance of seasonal behavior in the volatility for the pricing of commodity options is analyzed. We propose a seasonally varying long-run mean variance process that is capable of capturing empirically observed patterns. Semi-closed form option valuation formulas are derived. We then empirically study the impact of the proposed seasonal stochastic volatility model on the pricing accuracy of natural gas futures options traded at the New York Mercantile Exchange (NYMEX) and corn futures options traded at the Chicago Board of Trade (CBOT). Our results demonstrate that allowing stochastic volatility to fluctuate seasonally significantly reduces pricing errors for these contracts.
Author : Nazibrola Lordkipanidze
Publisher :
ISBN 13 :
Total Pages : 296 pages
Book Rating : 4.E/5 ( download)
Download or read book Modeling and Estimation of Long-memory in Stochastic Volatility written by Nazibrola Lordkipanidze and published by . This book was released on 2004 with total page 296 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Jilong Chen
Publisher :
ISBN 13 :
Total Pages : 23 pages
Book Rating : 4.:/5 (13 download)
Download or read book Pricing Commodity Futures Options in the Schwartz Multi Factor Model with Stochastic Volatility written by Jilong Chen and published by . This book was released on 2016 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we investigate the applicability of the asymptotic approach developed in Fouque et al. (2000) for pricing commodity futures options in a Schwartz (1997) multi factor model, featuring both stochastic convenience yield and stochastic volatility. We show that the zero order term in the expansion coincides with the Schwartz (1997) two factor term, with expected long-term volatility replacing the constant volatility term, and provide an explicit expression for the first order correction term. Using empirical data from the natural gas futures market, we demonstrate that a significantly better calibration can be achieved by involving the correction term as compared to the standard Schwartz (1997) two factor expression. This improvement comes at virtually no extra effort.
Author : Gonzalo Cortazar
Publisher :
ISBN 13 :
Total Pages : 60 pages
Book Rating : 4.:/5 (13 download)
Download or read book A Multifactor Stochastic Volatility Model of Commodity Prices written by Gonzalo Cortazar and published by . This book was released on 2016 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: We propose a novel representation of commodity spot prices in which the cost-of-carry and the spot price volatility are both driven by an arbitrary number of risk factors, nesting many existing specifications. The model exhibits unspanned stochastic volatility, provides simple closed-form expressions of commodity futures, and yields analytic formulas of European options on futures. We estimate the model using oil futures and options data, and find that the pricing of traded contracts is accurate for a wide range of maturities and strike prices. The results suggest that at least three risk factors in the spot price volatility are needed to accurately fit the volatility surface of options on oil futures, highlighting the importance of using general multifactor models in pricing commodity contingent claims.
Author : Nasibrola Lordkipanidze
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (931 download)
Download or read book Pricing of Options with Stochastic Volatilities written by Nasibrola Lordkipanidze and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The empirical evidence in this paper supports the existence of seasonality, time-to-maturity, and long-memory effects in the volatility of prices, but not in the returns themselves, in corn and soybean futures markets. This volatility is modeled as an Orenstein-Ulenbeck process driven by fractional Brownian motion. The inclusion of long-memory stochastic volatility is found to have a significant impact upon the term structure of implied volatilities, and should be able to provide better estimates of in- and out-of-the money options ́prices.
Author : Michael Jamel Osei
Publisher :
ISBN 13 :
Total Pages : 128 pages
Book Rating : 4.:/5 (865 download)
Download or read book Seasonality and Stochastic Volatility in the Wheat Options written by Michael Jamel Osei and published by . This book was released on 2013 with total page 128 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Craig Pirrong
Publisher : Cambridge University Press
ISBN 13 : 1139501976
Total Pages : 238 pages
Book Rating : 4.1/5 (395 download)
Download or read book Commodity Price Dynamics written by Craig Pirrong and published by Cambridge University Press. This book was released on 2011-10-31 with total page 238 pages. Available in PDF, EPUB and Kindle. Book excerpt: Commodities have become an important component of many investors' portfolios and the focus of much political controversy over the past decade. This book utilizes structural models to provide a better understanding of how commodities' prices behave and what drives them. It exploits differences across commodities and examines a variety of predictions of the models to identify where they work and where they fail. The findings of the analysis are useful to scholars, traders and policy makers who want to better understand often puzzling - and extreme - movements in the prices of commodities from aluminium to oil to soybeans to zinc.
Author : Anders B. Trolle
Publisher :
ISBN 13 :
Total Pages : 50 pages
Book Rating : 4.:/5 (255 download)
Download or read book Unspanned Stochastic Volatility and the Pricing of Commodity Derivatives written by Anders B. Trolle and published by . This book was released on 2006 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: We conduct a comprehensive analysis of unspanned stochastic volatility in commodity markets in general and the crude-oil market in particular. We present model-free results that strongly suggest the presence of unspanned stochastic volatility in the crude-oil market. We then develop a tractable model for pricing commodity derivatives in the presence of unspanned stochastic volatility. The model features correlations between innovations to futures prices and volatility, quasi-analytical prices of options on futures and futures curve dynamics in terms of a low-dimensional affine state vector. The model performs well when estimated on an extensive panel data set of crude-oil futures and options.
Author : Carl Chiarella
Publisher :
ISBN 13 :
Total Pages : 30 pages
Book Rating : 4.:/5 (13 download)
Download or read book The Return-Volatility Relation in Commodity Futures Markets written by Carl Chiarella and published by . This book was released on 2015 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: By employing a continuous time stochastic volatility model, the dynamic relation between price returns and volatility changes in the commodity futures markets is analysed. An extensive daily database of gold and crude oil futures and futures options is used to estimate the model that is well suited to assess the return-volatility relation for the entire term structure of futures prices. The empirical results indicate a positive relation in the gold futures market and a negative relation in the crude oil futures market, especially over periods of high volatility principally driven by market-wide shocks. However, the opposite reaction occurs over quiet volatility periods when typically commodity-specific effects dominate. As leverage effect, volatility feedback effect and inventory effect do not adequately explain this reaction especially for the crude oil futures, the convenience yield effect is proposed. Accordingly, commodity futures markets in backwardation entail a positive relation, while futures markets in contango entail a negative relation.
Author : Gareth Peters
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (13 download)
Download or read book Calibration and Filtering for Multi Factor Commodity Models with Seasonality written by Gareth Peters and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We construct a general multi-factor model for estimation and calibration of commodity spot prices and futures valuation. This extends the multi-factor long-short model in Schwartz and Smith (2000) and Yan (2002) in two important aspects: firstly we allow for both the long and short term dynamic factors to be mean reverting incorporating stochastic volatility factors and secondly we develop an additive structural seasonality model. In developing this non-linear continuous time stochastic model we maintain desirable model properties such as being arbitrage free and exponentially affine, thereby allowing us to derive closed form futures prices. In addition the models provide an improved capability to capture dynamics of the futures curve calibration in different commodities market conditions such as backwardation and contango. A Milstein scheme is used to provide an accurate discretized representation of the s.d.e.model. This results in a challenging non-linear non-Gaussian state-space model. To carry out inference, we develop an adaptive particle Markov chain Monte Carlo method. This methodology allows us to jointly calibrate and filter the latent processes for the long-short and volatility dynamics. This methodology is general and can be applied to the estimation and calibration of many of the other multi-factor stochastic commodity models proposed in the literature. We demonstrate the performance of our model and algorithm on both synthetic data and real data for futures contracts on crude oil.
Download or read book Affine Diffusion Modeling of Commodity Futures Price Term Structure written by and published by . This book was released on 2003 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Diffusion modeling of commodity price behavior is important for commodity risk management. This research seeks to improve upon the existing commodity diffusion models by incorporating stochastic volatility and seasonality through the affine diffusion framework. In particular, it evaluates affine diffusion models' performance at modeling commodity futures price term structure. Six affine diffusion models are studied in this research. They are one, two, three-factor Gaussian model and one, two, three-factor stochastic volatility model with a single stochastic volatility factor. Seasonality is modeled by allowing the forcing terms of the instantaneous drift and the instantaneous covariance to be seasonal. Model estimation is done through Q-MLE, for which the state variables are filtered through the Kalman Filter. To build the connection between affine diffusion models and known market regularities, affine state variables are interpreted. Factor interpretations used include the log of the spot price, a spot drift factor, and a spot variance factor. Empirical analysis covers models' performance at fitting and predicting futures price term structures; behavior of the interpretable models; and model stability. Empirical studies are applied to the corn and the unleaded gasoline markets. The following conclusions can be drawn from both markets: 1. For the purpose of modeling futures price dynamics alone, stochastic volatility models have no advantage over Gaussian models; 2. At least two factors are needed to adequately model commodity futures price term structures; the advantage of three-factor models, which is better capturing the curvature of the term structures, become evident under extreme market conditions; 3. State independent seasonality modeling is effective under most market conditions, but under extreme market conditions, seasonality can be mis-represented and it is the source of big measurement errors and prediction errors. 4. Two and three-factor affine diffusio.
Author : Leif B. G. Andersen
Publisher :
ISBN 13 :
Total Pages : 45 pages
Book Rating : 4.:/5 (129 download)
Download or read book Markov Models for Commodity Futures written by Leif B. G. Andersen and published by . This book was released on 2008 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: This objective of this paper is to develop a generic, yet practical framework for construction of Markov models for commodity derivatives. We aim for sufficient richness to permit applications to a broad variety of commodity markets, including those that are characterized by seasonality and by spikes in the spot process. In the first, largely theoretical, part of the paper we derive a series of useful results about low-dimensional Markov representation of the dynamics of an entire term structure of futures prices. Extending previous results in the literature, we cover jump-diffusive models with stochastic volatility as well as several classes of regime-switch models. To demonstrate the process of building models for a specific commodity market, the second part of the paper applies a selection of our theoretical results to the exercise of constructing and calibrating derivatives trading models for USD natural gas. Special attention is paid to the incorporation of empirical seasonality effects in futures prices, in implied volatilities and their smile, and in correlations between futures contracts of different maturities. European option pricing in our proposed gas model is closed-form and of the same complexity as the Black-Scholes formula.
Author : Carsten Sørensen
Publisher :
ISBN 13 :
Total Pages : 40 pages
Book Rating : 4.:/5 (129 download)
Download or read book Seasonality in Agricultural Commodity Futures written by Carsten Sørensen and published by . This book was released on 2001 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: The stochastic behavior of agricultural commodity prices is investigated using observations of the term structures of futures prices over time. The continuous time dynamics of (log-) commodity prices are modeled as a sum of a deterministic seasonal component, a non-stationary state-variable, and a stationary state-variable. Futures prices are established by standard no-arbitrage arguments and the Kalman filter methodology is used to estimate the model parameters for corn futures, soybean futures, and wheat futures based on weekly data from the Chicago Board of Trade for the period 1972-1997. Furthermore, in a discussion of the estimated seasonal patterns in agricultural commodity prices, the paper provides empirical evidence on the theory of storage that predicts a negative relationship between stocks of inventory and convenience yields; in particular, convenience yields used in this analysis are extracted using the Kalman filter.
Author : Kristian R. Miltersen
Publisher :
ISBN 13 :
Total Pages : 40 pages
Book Rating : 4.3/5 ( download)
Download or read book Pricing of Options on Commodity Futures with Stochastic Term Structures of Convenience Yields and Interest Rates written by Kristian R. Miltersen and published by . This book was released on 1997 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Walker Keener Hughen
Publisher :
ISBN 13 :
Total Pages : 208 pages
Book Rating : 4.:/5 (166 download)
Download or read book A Maximal Stochastic Volatility Model for Commodity Prices written by Walker Keener Hughen and published by . This book was released on 2007 with total page 208 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : M. A. H. Dempster
Publisher : CRC Press
ISBN 13 : 1000784045
Total Pages : 864 pages
Book Rating : 4.0/5 (7 download)
Download or read book Commodities written by M. A. H. Dempster and published by CRC Press. This book was released on 2022-12-09 with total page 864 pages. Available in PDF, EPUB and Kindle. Book excerpt: Since a major source of income for many countries comes from exporting commodities, price discovery and information transmission between commodity futures markets are key issues for continued economic development. Commodities: Fundamental Theory of Futures, Forwards, and Derivatives Pricing, Second Edition covers the fundamental theory of and derivatives pricing for major commodity markets, as well as the interaction between commodity prices, the real economy, and other financial markets. After a thoroughly updated and extensive theoretical and practical introduction, this new edition of the book is divided into five parts – the fifth of which is entirely new material covering cutting-edge developments. Oil Products considers the structural changes in the demand and supply for hedging services that are increasingly determining the price of oil Other Commodities examines markets related to agricultural commodities, including natural gas, wine, soybeans, corn, gold, silver, copper, and other metals Commodity Prices and Financial Markets investigates the contemporary aspects of the financialization of commodities, including stocks, bonds, futures, currency markets, index products, and exchange traded funds Electricity Markets supplies an overview of the current and future modelling of electricity markets Contemporary Topics discuss rough volatility, order book trading, cryptocurrencies, text mining for price dynamics and flash crashes
