The central part of pricing agricultural commodity futures options is to find appropriate stochastic process of the underlying assets. The Black’s (1976) futures option pricing model laid the foundation for a new era of futures option valuation theory. The geometric Brownian motion assumption girding the Black’s model, however, has been regarded as unrealistic in numerous empirical studies. Opt...

introduction: risk is an essential component in the production and sale of agricultural products. due to the nature of agricultural products, the people who act in this area including farmers and businesspersons encounter unpredictable fluctuations of prices. on the other hand, the firms that process agricultural products also face fluctuation of price of agricultural inputs. given that the can...

This paper proposes a new approximation method for pricing barrier options with discrete monitoring under stochastic volatility environment. In particular, the integration-by-parts formula and the duality formula in Malliavin calculus are effectively applied in an asymptotic expansion approach. First, the paper derives an asymptotic expansion for generalized Wiener functionals. After it is appl...

A general parametric framework based on the generalized Student t distribution is developed for pricing S&P500 options. Higher order moments in stock returns as well as time-varying volatility are priced. An important computational advantage of the proposed framework over Monte Carlo-based pricing methods is that options can be priced using one-dimensional quadrature integration. The empirical ...