Volatility Term Structure and Exotic Options

Ilia Bouchouev
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Ilia Bouchouev: Pentathlon Investments, LLC

Chapter 11 in Virtual Barrels, 2023, pp 233-256 from Springer

Abstract: Abstract We describe arguably the most significant oil derivative trade, the large-scale annual put buying program by the Government of Mexico. The complexity of over-the-counter deals highlights the importance of handling the volatility term structure and the effect of volatility dampening by price averaging. A simplified and more practical model for pricing and hedging average price options, which are popular among end-users, is presented. Swaptions and other exotic derivatives are also discussed.

Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sptchp:978-3-031-36151-7_11

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DOI: 10.1007/978-3-031-36151-7_11

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