Implied volatility surface reconstruction for energy markets: spot price modeling versus surface parametrization

Mikhail V. Deryabin

Journal of Energy Markets

Abstract: ABSTRACT We describe and compare two methodologies for calculating the implied volatility of commodity prices (given the market prices of options on futures or implied volatilities, and a forward curve). The first methodology involves fitting an exponential mean-reverting jump-diffusion model to the data, while the second uses a particular parametrization of the surface that ensures no-arbitrage conditions. We use NYMEX data on West Texas Intermediate European-type oil options on futures as an example.

References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.risk.net/journal-of-energy-markets/216 ... face-parametrization (text/html)

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:rsk:journ2:2160766

Access Statistics for this article

More articles in Journal of Energy Markets from Journal of Energy Markets
Bibliographic data for series maintained by Thomas Paine ().