Year: 2015
Type: article
Abstract: We consider a seasonal mean‐reverting model for energy commodity prices with jumps and Heston‐type stochastic volatility, and three nested models for comparison. By exploiting the affine form of the log‐spot models, we develop a general valuation framework for futures and discrete arithmetic Asian options. We investigate five major petroleum commodities from Europe (Brent crude oil, gasoil) and US (light sweet crude oil, gasoline, heating oil) and analyse the effects of the competing fitted spot models in futures pricing, Asian options pricing and hedging. We find evidence that price jumps and stochastic volatility are important features of the petroleum price dynamics.
Source: European Financial Management
DOI: 10.1111/eufm.12071
Institution: City, University of London
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2161086202