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We investigate quotation and transaction activities in the foreign exchange market for every week during the period of June 2007 to December 2010. A scaling relationship between the mean values of number of quotations (or number of…
Sales data in a commodity market (supermarket sales to consumers) has been analysed by studying the fluctuation spectrum and noise correlations. Three related products (ketchup, mayonnaise and curry sauce) have been analysed. Most noise in…
We introduce an agent-based model, in which agents set their prices to maximize profit. At steady state the market self-organizes into three groups: excess producers, consumers and balanced agents, with prices determined by their own…
We examine a general multi-factor model for commodity spot prices and futures valuation. We extend 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…
We consider a novel use case for the Double Heston model (Christoffersen et al,, 2009), where the two Heston sub-variances have different spot/volatility correlations but the same volatility of volatility and mean reversion speed. This…
In a globalised world, inflation in a given country may be becoming less responsive to domestic economic activity, while being increasingly determined by international conditions. Consequently, understanding the international sources of…
We introduce a multi-factor stochastic volatility model based on the CIR/Heston volatility process that incorporates seasonality and the Samuelson effect. First, we give conditions on the seasonal term under which the corresponding…
This paper combines the Copula-CoVaR approach with the ARMA-GARCH-skewed Student-t model to investigate the tail dependence structure and extreme risk spillover effects between the international agricultural futures and spot markets, taking…
Pricing decisions are often made when market information is still poor. In turn, existing theoretical models often reason about the response of optimal prices to changing market characteristics without exploiting all available information…
The paper proposes a framework for modeling and analysis of the dynamics of supply, demand, and clearing prices in power system with real-time retail pricing and information asymmetry. Real-time retail pricing is characterized by passing on…
Our article considers a regression model with observed factors. The observed factors have a flexible stochastic volatility structure that has separate dynamics for the volatilities and the correlation matrix. The correlation matrix of the…
We analyze the VIX futures market with a focus on the exchange-traded notes written on such contracts, in particular we investigate the VXX notes tracking the short-end part of the futures term structure. Inspired by recent developments in…
Although stochastic volatility and GARCH (generalized autoregressive conditional heteroscedasticity) models have successfully described the volatility dynamics of univariate asset returns, extending them to the multivariate models with…
Matrix-variate data of high dimensions are frequently observed in finance and economics, spanning extended time periods, such as the long-term data on international trade flows among numerous countries. To address potential structural…
In economic studies and popular media, interest rates are routinely cited as a major factor behind commodity price fluctuations. At the same time, the transmission channels are far from transparent, leading to long-running debates on the…
We present a stochastic-local volatility model for derivative contracts on commodity futures able to describe forward-curve and smile dynamics with a fast calibration to liquid market quotes. A parsimonious parametrization is introduced to…
We consider stochastic volatility models under parameter uncertainty and investigate how model derived prices of European options are affected. We let the pricing parameters evolve dynamically in time within a specified region, and…
The effects of weather on agriculture in recent years have become a major global concern. Hence, the need for an effective weather risk management tool (i.e., weather derivatives) that can hedge crop yields against weather uncertainties.…
This paper presents closed-form analytical formulas for pricing volatility and variance derivatives with nonlinear payoffs under discrete-time observations. The analysis is based on a probabilistic approach assuming that the underlying…
In this paper we analyzed dependencies in commodity markets investigating correlations of future contracts for commodities over the period 1998.09.01 - 2007.12.14. We constructed a minimal spanning tree based on the correlation matrix. The…