Related papers: Pricing commodity index options
In this article, we analyze two modeling approaches for the pricing of derivative contracts on a commodity index. The first one is a microscopic approach, where the components of the index are modeled individually, and the index price is…
In commodity and energy markets swing options allow the buyer to hedge against futures price fluctuations and to select its preferred delivery strategy within daily or periodic constraints, possibly fixed by observing quoted futures…
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…
In this paper we present a new method to compute the first-order approximation of the price of derivatives on futures in the context of multiscale stochastic volatility of Fouque \textit{et al.} (2011, CUP). It provides an alternative…
We introduce a local volatility model for the valuation of options on commodity futures by using European vanilla option prices. The corresponding calibration problem is addressed within an online framework, allowing the use of multiple…
We study the local volatility function in the Foreign Exchange market where both domestic and foreign interest rates are stochastic. This model is suitable to price long-dated FX derivatives. We derive the local volatility function and…
This article presents a generic framework for modeling the dynamics of forward curves in commodity market as commodity derivatives are typically traded by futures or forwards. We have theoretically demonstrated that commodity prices are…
We study a market model in which the volatility of the stock may jump at a random time from a fixed value to another fixed value. This model was already described in the literature. We present a new approach to the problem, based on partial…
This paper investigates how the conditional quantiles of future returns and volatility of financial assets vary with various measures of ex-post variation in asset prices as well as option-implied volatility. We work in the flexible…
Pricing composite and quanto contracts requires a joint model of both the underlying asset and the exchange rate. In this contribution, we explore the potential of local-correlation models to address the challenges of calibrating synthetic…
We consider portfolio optimization in futures markets. We model the entire futures price curve at once as a solution of a stochastic partial differential equation. The agents objective is to maximize her utility from the final wealth when…
In this paper, we develop a general rough volatility model for commodities that provides an automatic calibration of the initial term structure of the futures prices and an appropriate treatment of the Samuelson effect. After the…
Based on the existing literature, this article presents the different ways of choosing the parameters of stochastic volatility models in general, in the context of pricing financial derivative contracts. This includes the use of stochastic…
In this paper we study the pricing of exchange options when underlying assets have stochastic volatility and stochastic correlation. An approximation using a closed-form approximation based on a Taylor expansion of the conditional price is…
Spot option prices, forwards and options on forwards relevant for the commodity markets are computed when the underlying process S is modelled as an exponential of a process {\xi} with memory as e.g. a L\'evy semi-stationary process.…
Accurately forecasting the price of oil, the world's most actively traded commodity, is of great importance to both academics and practitioners. We contribute by proposing a functional time series based method to model and forecast oil…
The literature on volatility modelling and option pricing is a large and diverse area due to its importance and applications. This paper provides a review of the most significant volatility models and option pricing methods, beginning with…
This paper introduces an information-based model for the pricing of storable commodities such as crude oil and natural gas. The model uses the concept of market information about future supply and demand as a basis for valuation. Physical…
We investigate the problem of pricing derivatives under a fractional stochastic volatility model. We obtain an approximate expression of the derivative price where the stochastic volatility can be composed of deterministic functions of time…
This paper investigates how realized and option implied volatilities are related to the future quantiles of commodity returns. Whereas realized volatility measures ex-post uncertainty, volatility implied by option prices reveals the…