FORWARD PRICES AS FUNCTIONALS OF THE SPOT PATH IN COMMODITY MARKETS MODELED BY LEVY SEMISTATIONARY PROCESSES

Fred Espen Benth () and Sara Ana Solanilla Blanco ()
Additional contact information
Fred Espen Benth: Department of Mathematics, University of Oslo, P.O. Box 1053, Blindern, N–0316 Oslo, Norway
Sara Ana Solanilla Blanco: Department of Mathematics, University of Oslo, P.O. Box 1053, Blindern, N–0316 Oslo, Norway

International Journal of Theoretical and Applied Finance (IJTAF), 2015, vol. 18, issue 02, 1-35

Abstract: We show that the forward price can be represented as a functional of the spot price path in the case of Lévy semistationary (LSS) models for the spot dynamics. The functional is a weighted average of the historical spot price in general, and is derived by means of the Laplace transform. For the special cases of continuous-time autoregressive (CAR) moving average and Gamma-LSS processes for the spot dynamics, we are able to produce an analytical weight function. Both classes of processes are of interest in markets for power, weather and shipping, and we provide a discussion of the results based on numerical examples.

Keywords: Forward price; spot-forward relationship; weather markets; energy markets; interest rate theory; Lévy processes; stationary processes; continuous-time autoregressive moving average processes (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S0219024915500107
Access to full text is restricted to subscribers

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:wsi:ijtafx:v:18:y:2015:i:02:n:s0219024915500107

Ordering information: This journal article can be ordered from

DOI: 10.1142/S0219024915500107

Access Statistics for this article

International Journal of Theoretical and Applied Finance (IJTAF) is currently edited by L P Hughston

More articles in International Journal of Theoretical and Applied Finance (IJTAF) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().