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Three-factor commodity forward curve model and its joint P and Q dynamics

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  • Ladokhin, Sergiy
  • Borovkova, Svetlana

Abstract

In this paper, we propose a new framework for modeling commodity forward curves. The proposed model describes the dynamics of fundamental driving factors simultaneously under physical (P) and risk-neutral (Q) probability measures.

Suggested Citation

  • Ladokhin, Sergiy & Borovkova, Svetlana, 2021. "Three-factor commodity forward curve model and its joint P and Q dynamics," Energy Economics, Elsevier, vol. 101(C).
    • Handle: RePEc:eee:eneeco:v:101:y:2021:i:c:s0140988321003121
    DOI: 10.1016/j.eneco.2021.105418
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. David Lee, 2022. "Modeling Commodity Price Dynamics," Working Papers hal-03758093, HAL.
    2. Orcan Ogetbil & Bernhard Hientzsch, 2022. "A Flexible Commodity Skew Model with Maturity Effects," Papers 2212.07972, arXiv.org.
    3. Lee, David, 2022. "Generic Price Model for Commodity Derivatives," MPRA Paper 114283, University Library of Munich, Germany.

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    More about this item

    Keywords

    Commodity forward curve; Derivatives pricing; Oil futures; Joint dynamics model; Kalman filter; Brent oil futures;
    All these keywords.

    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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