Affine†Structure Models and the Pricing of Energy Commodity Derivatives

Ioannis Kyriakou, Nikos K. Nomikos, Nikos Papapostolou () and Panos Pouliasis

European Financial Management, 2016, vol. 22, issue 5, 853-881

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.

Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
https://doi.org/10.1111/eufm.12071

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:eufman:v:22:y:2016:i:5:p:853-881

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1354-7798

Access Statistics for this article

European Financial Management is currently edited by John Doukas

More articles in European Financial Management from European Financial Management Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().