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Modelos estocásticos para el precio spot y del futuro de commodities con alta volatilidad y reversión a la media
[Stochastic models for the spot and future prices of commodities with high volatility and mean reversion]

Author

Listed:
  • García de la Vega, Victor Manuel
  • Ruiz-Porras, Antonio

Abstract

The pricing of commodity derivatives requires that the underlying asset be modelled with mean reversion and high volatility. We develop closed formulas to price the spot of the commodity, its future, and to price a call option on the spot and on the commodity future, in the real world and under risk neutrality, by using a 1 factor model.

Suggested Citation

  • García de la Vega, Victor Manuel & Ruiz-Porras, Antonio, 2009. "Modelos estocásticos para el precio spot y del futuro de commodities con alta volatilidad y reversión a la media
    [Stochastic models for the spot and future prices of commodities with high volatilit
    ," MPRA Paper 23177, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:23177
    as

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    File URL: https://mpra.ub.uni-muenchen.de/23177/1/MPRA_paper_23177.pdf
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    References listed on IDEAS

    as
    1. Bessembinder, Hendrik, et al, 1995. " Mean Reversion in Equilibrium Asset Prices: Evidence from the Futures Term Structure," Journal of Finance, American Finance Association, vol. 50(1), pages 361-375, March.
    2. Cox, John C. & Ross, Stephen A., 1976. "The valuation of options for alternative stochastic processes," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 145-166.
    3. Schwartz, Eduardo S, 1997. " The Stochastic Behavior of Commodity Prices: Implications for Valuation and Hedging," Journal of Finance, American Finance Association, vol. 52(3), pages 923-973, July.
    4. Gibson, Rajna & Schwartz, Eduardo S, 1990. " Stochastic Convenience Yield and the Pricing of Oil Contingent Claims," Journal of Finance, American Finance Association, vol. 45(3), pages 959-976, July.
    5. Harrison, J. Michael & Kreps, David M., 1979. "Martingales and arbitrage in multiperiod securities markets," Journal of Economic Theory, Elsevier, vol. 20(3), pages 381-408, June.
    6. Patrick Jaillet & Ehud I. Ronn & Stathis Tompaidis, 2004. "Valuation of Commodity-Based Swing Options," Management Science, INFORMS, vol. 50(7), pages 909-921, July.
    7. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
    8. Black, Fischer, 1976. "The pricing of commodity contracts," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 167-179.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Real world; Risk Neutral world; mean reversion;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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