A Jump Diffusion Model for Agricultural Commodities with Bayesian Analysis

Adam Schmitz, Zhiguang Wang and Jung‐Han Kimn

Journal of Futures Markets, 2014, vol. 34, issue 3, 235-260

Abstract: Stochastic volatility, price jumps, seasonality, and stochastic cost of carry have been included separately, but not collectively, in pricing models of agricultural commodity futures and options. We propose a comprehensive model that incorporates all four features. We employ a special Markov chain Monte Carlo algorithm, new in the agricultural commodity derivatives pricing literature, to estimate the proposed stochastic volatility (SV) and stochastic volatility with jumps (SVJ) models. Overall model fitness tests favor the SVJ model. The in‐sample and out‐of‐sample pricing results for corn, soybeans and wheat generally, with few exceptions, lend support for the SVJ model. © 2013 Wiley Periodicals, Inc. Jrl Fut Mark 34:235–260, 2014

Date: 2014
References: Add references at CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://hdl.handle.net/

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:wly:jfutmk:v:34:y:2014:i:3:p:235-260

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0270-7314

Access Statistics for this article

Journal of Futures Markets is currently edited by Robert I. Webb

More articles in Journal of Futures Markets from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().