A multifactor stochastic volatility model of commodity prices

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dc.contributor.authorCortazar, Gonzalo
dc.contributor.authorLopez, Matias
dc.contributor.authorNaranjo, Lorenzo
dc.date.accessioned2025-01-23T21:24:30Z
dc.date.available2025-01-23T21:24:30Z
dc.date.issued2017
dc.description.abstractWe propose a novel representation of commodity spot prices in which the cost-of-carry and the spot price volatility are both driven by an arbitrary number of risk factors, nesting many existing specifications. The model exhibits unspanned stochastic volatility, provides simple closed-form expressions of commodity futures, and yields analytic formulas of European options on futures. We estimate the model using oil futures and options data, and find that the pricing of traded contracts is accurate for a wide,range of maturities and strike prices. The results suggest that at least three risk factors in the spot price volatility are needed to accurately fit the volatility surface of options on oil futures, highlighting the importance of using general multifactor models in pricing commodity contingent claims. (C) 2017 Elsevier B.V. All rights reserved.
dc.fuente.origenWOS
dc.identifier.doi10.1016/j.eneco.2017.08.007
dc.identifier.eissn1873-6181
dc.identifier.issn0140-9883
dc.identifier.urihttps://doi.org/10.1016/j.eneco.2017.08.007
dc.identifier.urihttps://repositorio.uc.cl/handle/11534/101308
dc.identifier.wosidWOS:000414816200017
dc.language.isoen
dc.pagina.final201
dc.pagina.inicio182
dc.revistaEnergy economics
dc.rightsacceso restringido
dc.subjectCommodities
dc.subjectMultifactor models
dc.subjectStochastic volatility
dc.subjectDerivatives
dc.subject.ods08 Decent Work and Economic Growth
dc.subject.odspa08 Trabajo decente y crecimiento económico
dc.titleA multifactor stochastic volatility model of commodity prices
dc.typeartículo
dc.volumen67
sipa.indexWOS
sipa.trazabilidadWOS;2025-01-12
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