Seasonality in commodity prices: new approaches for pricing plain vanilla options
We present a new term-structure model for commodity futures prices based on Trolle and Schwartz ( 2009 ), which we extend by incorporating seasonal stochastic volatility represented with two different sinusoidal expressions. We obtain a quasi-analytical representation of the characteristic function...
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| Veröffentlicht in: | Annals of operations research 2024-05, Vol.336 (1-2), p.1089-1131 |
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| creator | Frau, Carme Fanelli, Viviana |
| description | We present a new term-structure model for commodity futures prices based on Trolle and Schwartz (
2009
), which we extend by incorporating seasonal stochastic volatility represented with two different sinusoidal expressions. We obtain a quasi-analytical representation of the characteristic function of the futures log-prices and closed-form expressions for standard European options’ prices using the fast Fourier transform algorithm. We price plain vanilla options on the Henry Hub natural gas futures contracts, using our model and extant models. We obtain higher accuracy levels with our model than with the extant models. |
| doi_str_mv | 10.1007/s10479-022-05128-x |
| format | Article |
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2009
), which we extend by incorporating seasonal stochastic volatility represented with two different sinusoidal expressions. We obtain a quasi-analytical representation of the characteristic function of the futures log-prices and closed-form expressions for standard European options’ prices using the fast Fourier transform algorithm. We price plain vanilla options on the Henry Hub natural gas futures contracts, using our model and extant models. We obtain higher accuracy levels with our model than with the extant models.</description><identifier>ISSN: 0254-5330</identifier><identifier>EISSN: 1572-9338</identifier><identifier>DOI: 10.1007/s10479-022-05128-x</identifier><language>eng</language><publisher>New York: Springer US</publisher><subject>Agricultural commodities ; Algorithms ; Arbitrage ; Business and Management ; Characteristic functions ; Combinatorics ; Commodities ; Commodity prices ; Crude oil ; Economics ; Electricity ; Fast Fourier transformations ; Fourier transforms ; Futures ; Natural gas ; Natural gas prices ; Operations research ; Operations Research/Decision Theory ; Original Research ; Pricing ; Seasonal variations ; Securities prices ; Theory of Computation ; Volatility</subject><ispartof>Annals of operations research, 2024-05, Vol.336 (1-2), p.1089-1131</ispartof><rights>The Author(s) 2022</rights><rights>The Author(s) 2022. This work is published under http://creativecommons.org/licenses/by/4.0/ (the “License”). Notwithstanding the ProQuest Terms and Conditions, you may use this content in accordance with the terms of the License.</rights><lds50>peer_reviewed</lds50><oa>free_for_read</oa><woscitedreferencessubscribed>false</woscitedreferencessubscribed><cites>FETCH-LOGICAL-c314t-4783488e2647eef4df335132348688ddf16d4112248f844cd9c79a96e283390c3</cites><orcidid>0000-0003-0191-5424 ; 0000-0002-0212-204X</orcidid></display><links><openurl>$$Topenurl_article</openurl><openurlfulltext>$$Topenurlfull_article</openurlfulltext><thumbnail>$$Tsyndetics_thumb_exl</thumbnail><linktopdf>$$Uhttps://link.springer.com/content/pdf/10.1007/s10479-022-05128-x$$EPDF$$P50$$Gspringer$$Hfree_for_read</linktopdf><linktohtml>$$Uhttps://link.springer.com/10.1007/s10479-022-05128-x$$EHTML$$P50$$Gspringer$$Hfree_for_read</linktohtml><link.rule.ids>314,776,780,27903,27904,41467,42536,51297</link.rule.ids></links><search><creatorcontrib>Frau, Carme</creatorcontrib><creatorcontrib>Fanelli, Viviana</creatorcontrib><title>Seasonality in commodity prices: new approaches for pricing plain vanilla options</title><title>Annals of operations research</title><addtitle>Ann Oper Res</addtitle><description>We present a new term-structure model for commodity futures prices based on Trolle and Schwartz (
2009
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2009
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| ispartof | Annals of operations research, 2024-05, Vol.336 (1-2), p.1089-1131 |
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| subjects | Agricultural commodities Algorithms Arbitrage Business and Management Characteristic functions Combinatorics Commodities Commodity prices Crude oil Economics Electricity Fast Fourier transformations Fourier transforms Futures Natural gas Natural gas prices Operations research Operations Research/Decision Theory Original Research Pricing Seasonal variations Securities prices Theory of Computation Volatility |
| title | Seasonality in commodity prices: new approaches for pricing plain vanilla options |
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