Energy futures prices: term structure models with Kalman filter estimation
We present a class of multi-factor stochastic models for energy futures prices, similar to the interest rate futures models recently formulated by Heath. We do not postulate directly the risk-neutral processes followed by futures prices, but define energy futures prices in terms of a spot price, not directly observable, driven by several stochastic factors. Our formulation leads to an expression for futures prices which is well suited to the application of Kalman filtering techniques together with maximum likelihood estimation methods. Based on these techniques, we perform an empirical study of a one- and a two-factor model for futures prices for natural gas.
Volume (Year): 9 (2002)
Issue (Month): 1 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RAMF20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RAMF20|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Eduardo Schwartz & James E. Smith, 2000. "Short-Term Variations and Long-Term Dynamics in Commodity Prices," Management Science, INFORMS, vol. 46(7), pages 893-911, July.
- Heath, David & Jarrow, Robert & Morton, Andrew, 1992. "Bond Pricing and the Term Structure of Interest Rates: A New Methodology for Contingent Claims Valuation," Econometrica, Econometric Society, vol. 60(1), pages 77-105, January.
When requesting a correction, please mention this item's handle: RePEc:taf:apmtfi:v:9:y:2002:i:1:p:21-43. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)
If references are entirely missing, you can add them using this form.