Nber Working Paper Series Unspanned Stochastic Volatility and the Pricing of Commodity Derivatives
نویسندگان
چکیده
The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research. ABSTRACT 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.
منابع مشابه
Unspanned stochastic volatility and the pricing of commodity derivatives
Commodity derivatives are becoming an increasingly important part of the global derivatives market. Here we develop a tractable stochastic volatility model for pricing commodity derivatives. The model features unspanned stochastic volatility, quasi-analytical prices of options on futures contracts, and dynamics of the futures curve in terms of a low-dimensional affine state vector. We estimate ...
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