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 price surfaces. Since uncertainty in the observation of the underlying future prices translates to uncertainty in data locations, we propose a model-based adjus...

After devising expectational measures of production, price and exchange rate uncertainty, this paper presents a model to derive an optimal hedging strategy for a primary producer who is subject to variability on the price and the amount of its output and on the exchange rate risk when the final proceeds of its sales are not denominated in its currency of numeraire. In this model, it is assumed ...

We study the impact of transparency in a commodity market on the decision problem of a competitive firm under price uncertainty and hedging opportunities. Market transparency is modeled by means of the informational content of publicly observable signals which are correlated with the random price. We find that the impact of more transparency on labor employment and production depends on the fir...

this study aims to estimate the function of copper consumption using the johansen approach in time series data, between 1991-2011 in iran. the literature review of specialized consumption and demand functions shows factors influencing the consumption of copper including copper price variables, aluminum price as a substitute commodity, oil price as a complementary commodity, and industrializatio...

— In challenging the conventional wisdom at the time, Singer and Prebisch posited a number of explanations for declining terms of trade of developing economies, including both countryand product-specific factors. Over the past decade, we have begun to witness a simultaneous process of price differentiation within commodities (with the prices of some commodities increasing) and within manufactur...

This paper applies real options theory into a resource extraction problem with capacity constraints and demand uncertainty. The producer decides on the optimal rate of extraction and the optimal time to build further capacity simultaneously. It is shown that previous results which suggest that extraction capacity should be built at the beginning, are not necessarily true under uncertainty. The ...

a r t i c l e i n f o According to empirical studies, speculators place significant orders in commodity markets and may cause bubbles and crashes. This paper develops a cobweb-like commodity market model that takes into account the behavior of technical and fundamental speculators. We show that interactions between consumers, producers and heterogeneous speculators may produce price dynamics wh...

Agreements for the exchange of commodities consist of explicit, objectively measured contractual components enforced by the state, and implicit, subjective components enforced by sellers’ reputation. People are better informed about the former than about the latter. I expect prices to diverge because the market does not fully adjust for differentials due to changes in the reputational component...

Derivatives are alternative financial instruments which extend traders opportunities to achieve some financial goals. They are risk management instruments that are related to a data in the future, and also they react to uncertain prices. Study on pricing futures can provide useful tools to understand the stochastic behavior of prices to manage the risk of price volatility. Thus, this study eval...