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Pricing commodity index options

Author

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  • Alberto Pedro Manzano-Herrero
  • Emanuele Nastasi
  • Andrea Pallavicini
  • Carlos Vázquez

Abstract

We present a stochastic local volatility model for derivative contracts on commodity futures. The aim of the model is to recover the prices of derivative claims both on future contracts and on indices on future strategies. Numerical examples for calibration and pricing are provided for the S&P GSCI Crude Oil excess-return index.

Suggested Citation

  • Alberto Pedro Manzano-Herrero & Emanuele Nastasi & Andrea Pallavicini & Carlos Vázquez, 2023. "Pricing commodity index options," Quantitative Finance, Taylor & Francis Journals, vol. 23(2), pages 297-308, February.
    • Handle: RePEc:taf:quantf:v:23:y:2023:i:2:p:297-308
    DOI: 10.1080/14697688.2022.2138775
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    1. Roger Lord & Remmert Koekkoek & Dick Van Dijk, 2010. "A comparison of biased simulation schemes for stochastic volatility models," Quantitative Finance, Taylor & Francis Journals, vol. 10(2), pages 177-194.
    2. Heston, Steven L, 1993. "A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options," The Review of Financial Studies, Society for Financial Studies, vol. 6(2), pages 327-343.
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    Cited by:

    1. Orcan Ogetbil & Bernhard Hientzsch, 2022. "A Flexible Commodity Skew Model with Maturity Effects," Papers 2212.07972, arXiv.org.

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